Exchange Rate Pass-Around

31 Pages Posted: 28 Mar 2024

See all articles by Matthieu Crozet

Matthieu Crozet

University of Paris-Saclay

Julian Hinz

European University Institute

Federico Trionfetti

Aix-Marseille University - Aix-Marseille School of Economics

Abstract

The strongest empirical regularity about the exchange rate pass-through is that it is incomplete. We provide a new theoretical explanation based on the unwillingness of some firms to price discriminate between markets. These firms set a single price to all destinations and adjust it when the exchange rate shock occurs. But the adjustment is not necessarily proportional since the change in the single price affects revenues in all markets. The single price strategy also implies a ``pass-around'' effect: The exchange rate shock has repercussions of price changes to all export markets. The analysis of price changes operated by French exporters in different markets after the EUR/CHF shock of 2015 provides evidence in favour of our theoretical explanation.

Keywords: Exchange rate pass-through, International Trade, Pricing-to-market

Suggested Citation

Crozet, Matthieu and Hinz, Julian and Trionfetti, Federico, Exchange Rate Pass-Around. Available at SSRN: https://ssrn.com/abstract=4776555 or http://dx.doi.org/10.2139/ssrn.4776555

Matthieu Crozet (Contact Author)

University of Paris-Saclay ( email )

France

Julian Hinz

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014
Italy

Federico Trionfetti

Aix-Marseille University - Aix-Marseille School of Economics ( email )

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