THE SEMINAR HAS BEEN CANCELLED IN LINE WITH THE RECENT ANNOUNCEMENT OF POLITECNICO DI MILANO

Andrea Fracasso
University of Trento

Abstract:

This paper contributes to the literature on pricing-to-market by assessing whether and to what extent firms take into account the expected future evolution of the exchange rate while setting their export prices.
Using French micro-level trade data and exploiting the expectations of future bilateral exchange rates reported by a large pool of financial intermediaries and investors, the empirical analysis reveals that firms adjust their export prices, absorbing part of both the observed and the expected future variations.
Estimations exploiting firm heterogeneity in terms of market power and intensity of imported inputs show that the elasticity of export prices to the expected exchange rate variations depends on the former, in accordance with theoretical dynamic demand-side models encompassing mechanisms creating an intertemporal relationship between current market shares and future profits. Moreover, the analysis shows that the strength of such expectation related mechanism is considerably reduced when the uncertainty regarding future exchange rates is greater, in line with an interpretation of pricing-to-market as an investment decision under uncertainty.

Andrea Fracasso is Professor of Economic Policy at the Department of Economics and Management at the School of International Studies of the University of Trento. Since 2016 he is the Director of the School of International Studies.

Please click here to register.

Venue
Department of Management, Economics and Industrial Engineering
Building B26/B – Meeting Room 3.23 – third floor
Via Lambruschini 4/B, Milano