Exchange-Rate Pass-Through and Invoicing Currency Choice in International Production Networks

Alessandro Ferrari, Andreas Freitag, Eric Kammerlander, Sarah Lein and Frank Pisch

No 21144, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study exchange-rate pass-through and currency choice in international transactions, focusing on bilateral bargaining power in relationships between domestic buyers and foreign suppliers. Using detailed transaction-level data on Swiss imports from 2014–2023 identifying buyers and suppliers, we show that exchange-rate pass-through is lower for economically important suppliers within a buyer’s network. This pattern is explained by a higher likelihood of invoicing in the buyer’s currency, consistent with a bilateral bargaining model of price setting and endogenous currency choice. Our results imply that bilateral bargaining power shapes how foreign shocks affect prices and external adjustment, making policy transmission network-dependent.

Keywords: Exchange-rate; pass-through (search for similar items in EconPapers)
JEL-codes: E31 E52 F14 F31 F41 G15 L11 L60 (search for similar items in EconPapers)
Date: 2026-02
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