Invoicing and the dynamics of pricing-to-market: Evidence from UK export prices around the Brexit referendum

Giancarlo Corsetti, Meredith Crowley and Lu Han

Journal of International Economics, 2022, vol. 135, issue C

Abstract: We provide micro-econometric evidence that, following the large and persistent sterling depreciation after the Brexit referendum, on impact, exchange rate pass-through (ERPT) was complete for transactions invoiced in producer currency and low for sales invoiced either in a vehicle or in the destination market currency. Yet these differences strikingly narrowed within six quarters. A weaker currency did not translate into a persistent gain in price competitiveness for UK exports. At a granular level we find that UK exporters invoice in multiple currencies—even when shipping a product to the same destination—and switch currencies over time. Remarkably, we fail to detect significant changes in the relative shares of invoicing currencies in response to the Brexit shock. Last but not least, we find that UK firms price-to-market, i.e., adjust markups to bilateral exchange rate and CPI movements, only when they invoice sales in the destination-market currency.

Keywords: Exchange rate; Pass through; Markup elasticity; Vehicle currency; Dominant currency; Firm level data (search for similar items in EconPapers)
JEL-codes: F31 F41 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199622000022
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Invoicing and the Dynamics of Pricing-to-Market: Evidence from UK Export Prices around the Brexit Referendum (2022)
Working Paper: Invoicing and the Dynamics of Pricing-to-market - Evidence from UK Export Prices around the Brexit Referendum (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:135:y:2022:i:c:s0022199622000022

DOI: 10.1016/j.jinteco.2022.103570

Access Statistics for this article

Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and Rodríguez-Clare, Andrés

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().