The impact of exchange rate fluctuations on markups - firm-level evidence for Switzerland

Elizabeth Steiner

No 2024-02, Working Papers from Swiss National Bank

Abstract: This paper estimates the impact of exchange rate fluctuations on markups. Firm-level markups are estimated for a comprehensive panel of Swiss manufacturing firms for the period 2012-2017 using a production-function approach. The pass-through of the exchange rate is then estimated using an event-study design exploiting the large, sudden and persistent appreciation of the Swiss franc against the euro in January 2015. The results show that following an appreciation, Swiss manufacturing firms adjust their markup very heterogeneously. Large firms, especially those that invoice in foreign currency or are highly profitable, substantially decrease their markup. Owing to their sheer size, large firms shape the aggregate response. In contrast, the average firm does not respond significantly. This suggests that smaller firms, which are in the majority, are either unable or unwilling to absorb exchange rate movements by adjusting their markup.

Keywords: Markup; Exchange rate; Pass-through; Firm-level data (search for similar items in EconPapers)
JEL-codes: D22 D24 F12 F14 F23 F41 L11 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2024
New Economics Papers: this item is included in nep-eff, nep-ind, nep-int, nep-mon, nep-opm and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2024-02

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