 Importers and exporters in exchange rate pass-through and currency invoicingMichael Devereux, Wei Dong and Ben Tomlin Journal of International Economics, 2017, vol. 105, issue C, 187-204 Abstract: We explore the role of product market structure on exchange rate pass-through and currency of invoicing in international trade, using very detailed transaction-level data on Canadian imports over a six-year period. A novel feature of the study is the importance of market share on both sides of the importing relationship — that of the exporting and importing firms. We find that exchange rate pass-through and the currency of invoicing are dependent on the size (or market share) of both importers and exporters. Very small or very large exporters have higher rates of pass-through and tend to invoice in the foreign currency, while it is the opposite for exporters in the middle range. By contrast, for larger importers, pass-through is lower and local currency invoicing is more prevalent. These findings are consistent with a simple model of trade pricing under monopolistic competition with endogenous markups and heterogeneity in firm size (on both sides of the transaction). Keywords: Exchange rate pass-through; Market structure; Currency of invoicing; Trade (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:105:y:2017:i:c:p:187-204 DOI: 10.1016/j.jinteco.2016.12.011 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
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