Exchange Rate Transmission and Export Activity at the Firm Level

Andrea Lassmann

No 13-331, KOF Working papers from KOF Swiss Economic Institute, ETH Zurich

Abstract: This paper analyses how exchange rate shocks are transmitted at the firm level and establishes a nexus to firm-level export activity. Using precise survey data from a sample of Swiss firms, I find that an appreciation increases the probability of a decrease in firm-level costs, prices and profits. Exchange rate movements are passed through to import prices, absorbed in firm selling prices and lead to adjustments in firm profits. The pattern is non-linear across firms with a varying degree of international exposure. The likelihood of adjustments is increasing in firm-level export share in total turnover. I also show that exchange rate variability affects adjustment probabilities. The analysis suggests that Swiss firms take prices as given. Exchange rate shocks are absorbed through a reduction in both costs and prices, however, these adjustments are not proportional such that overall profits decline during appreciation periods.

Keywords: Exchange rate; Exchange rate pass-through; Market structure; Firm-level data; Costs; Local prices; Profits; Exports (search for similar items in EconPapers)
Pages: 39 pages
Date: 2013-01
New Economics Papers: this item is included in nep-bec and nep-ifn
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:kof:wpskof:13-331

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