Pricing to market of Italian exporting firms

Roberto Basile (), Sergio de Nardis and Alessandro Girardi

Applied Economics, 2009, vol. 41, issue 12, 1543-1562

Abstract: This article investigates the pricing-to-market (PTM) behaviour of Italian exporting firms, using quarterly survey data by sector and by region over the period 1999q1 to 2005q2. A partial equilibrium imperfect competition model provides the structure according to which the orthogonality of structural shocks is derived. Impulse response analysis shows non-negligible reactions of export-domestic price margins to unanticipated changes in cost competitiveness and in foreign and domestic demand levels, even though these effects appear to be of a transitory nature. For the period 1999 to 2001, a typical PTM behaviour emerges, while, during the most recent years favourable foreign demand conditions allowed firms to increase their export-domestic price margins in face of a strong deterioration of their cost competitiveness. Macroeconomic implications of the observed PTM behaviour are also discussed.

Date: 2009
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Working Paper: Pricing to market of Italian exporting firms (2006)
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DOI: 10.1080/00036840601032219

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