The price strategies of export-oriented Italian firms
AbstractThis paper estimates a pricing-to-market equation for Italy over the period 1990-99 with the aim of assessing the degree of exchange rate pass-through (ERPT). As compared to previous works, we minimize aggregation and selection biases using export data on all products (about 700 from 4 digits of SITC) and all destination markets (about 70). On average, ERPT is asymmetric: Italian exporters did not reduce their profit margins, and thus did not defend their market shares, when the Italian lira got appreciated (complete ERPT); on the contrary, they did raise margins Â– in the order of 30 per cent of the exchange rate variation Â– after a depreciation. Disaggregating in terms of destination markets and products, ERPT is incomplete when exports are directed to industrial countries and originate in oligopolistic industries, more precisely high-tech and economies of scale sectors. Despite large overlappings, the same results hold for industries where firms are bigger and more productive than average. Sales of traditional competitive products to non-industrial countries display an almost complete ERPT.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 563.
Date of creation: Nov 2005
Date of revision:
exchange rate pass-through; pricing-to-market; market structure;
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F3 - International Economics - - International Finance
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-01 (All new papers)
- NEP-COM-2006-01-01 (Industrial Competition)
- NEP-IFN-2006-01-01 (International Finance)
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