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Export Performance, Invoice Currency, and Heterogeneous Exchange Rate Pass-Through

Richard Fabling and Lynda Sanderson

No 13_01, Working Papers from Motu Economic and Public Policy Research

Abstract: Using comprehensive, shipment-level merchandise trade data, we examine the extent to which New Zealand exporters maintain stable New Zealand dollar prices by passing on exchange rate changes to foreign customers. We find that the extent to which firms absorb exchange rate fluctuations in the short run is significantly related to both invoice currency choice and exporter characteristics when these are analysed separately. However, when jointly accounted for, the role of exporter characteristics largely disappears. That is, some firm types are more inclined to invoice in the New Zealand dollar, while others use either the importer or a third currency. In the short run, this translates into differences in exchange rate pass-through because of price rigidity in the invoice currency. Differences across invoice currencies diminish, but do not disappear, over time as prices adjust to reflect bilateral exchange rate movements.

Keywords: Exchange rate pass-through; firm performance (search for similar items in EconPapers)
JEL-codes: D12 F14 F31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-opm
Date: 2013-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

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http://motu-www.motu.org.nz/wpapers/13_01.pdf

Related works:
Journal Article: Export Performance, Invoice Currency and Heterogeneous Exchange Rate Pass-through (2015) Downloads
Working Paper: Export Performance, Invoice Currency, and Heterogeneous Exchange Rate Pass-Through (2013) Downloads
Working Paper: Export performance, invoice currency, and heterogeneous exchange rate pass-through (2013) Downloads
Working Paper: Export performance, invoice currency, and heterogeneous exchange rate pass-through (2013) Downloads
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