LOCAL VERSUS PRODUCER CURRENCY PRICING: EVIDENCE FROM DISAGGREGATED DATA

Alexis Antoniades

International Economic Review, 2012, vol. 53, issue 4, 1229-1241

Abstract: The pricing behavior of firms is a central issue in international macroeconomics. Using the introduction of the euro as a natural experiment I find that year‐to‐year volatility in import prices among Eurozone members diminished by 4% on average after the introduction of the euro. Additionally, I show that the magnitude of the drop was commensurate with the drop in exchange rate volatility. On the other hand, when looking at exports, I find that the introduction of the euro had no impact on export price volatility. The results support the hypothesis of producer currency pricing.

Date: 2012
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