Pricing-to-market of Brazilian exports: a case of vehicle currency invoicing

Sérgio Kannebley Júnior, Diogo de Prince and Daniel Quinaud Pedron da Silva
Authors registered in the RePEc Author Service: Diogo de Prince Mendonça ()

EconomiA, 2023, vol. 25, issue 1, 1-31

Abstract: Purpose - Brazil uses the dollar as a vehicle currency to invoice its exports. This fact produces a tendency toward equalizing the prices of products in dollars in the international market and reducing the ability of firms to practice pricing-to-market (PTM). This study aims to evaluate the hypothesis by estimating error correction models in panel data, obtaining estimates of PTM for 25 manufacturing products exported by Brazil between 2010 and 2020. Design/methodology/approach - This study uses the correlated common effect estimator proposed by Pesaran (2006) and Chudik and Pesaran (2015b) to estimate the PTM coefficients. Findings - Results of this study indicate that exporters practice local-currency pricing stability for dollar prices. This study obtains that Brazilian exporters tend to stabilize their dollar price for exports, reducing heterogeneity between destination markets. The results are in agreement with the hypothesis of the prevalence of the coalescing effect of Goldberg and Tille (2008) and lower sensitivity of the markup adjustment to the specific market, as pointed out by Corsettiet al.(2018). The pricing of Brazilian exports in dollars reflects a profit maximization strategy that considers an international price system based on global demand for products. Originality/value - In addition to analyzing the dollar role in the pricing of Brazilian exports through the triangular decomposition, this study also shows the importance of examining the cross-section dependence of errors, considering the heterogeneous cointegration in export pricing models and producing PTM estimates for short-term and long-term.

Keywords: Heterogeneous cointegration; International trade; Pricing-to-market; Error correction models; Cross-section dependence (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)

Related works:
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:eme:econpp:econ-01-2023-0010

DOI: 10.1108/ECON-01-2023-0010

Access Statistics for this article

EconomiA is currently edited by Professor Joaquim Andrade

More articles in EconomiA from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().