On the Role of Pricing Exports in a Third Currency
AbstractThe share of Swedish exports that are invoiced in U.S. dollars has doubled comparing a sample from 1968 with figures from 1993. There has been no corresponding increase in Swedish trade with the United States. This serves as motivation for our interest in price setting/invoicing in a third currency. We investigate the role of pricing in the importers', exporter's or a third currency in a simple model with pre-set prices. The firm of study is a risk neutral monopolist exporter who faces a linear demand curbe. Expected prices, quantities and profits depend on the price setting currency chosen. Also the curvature of realised profits as a function of exchange rate surprises depends on the price setting currency chosen. In an extension we discuss the role of competition from a third country in a model of Bertrand competition in differentiated goods.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 128.
Length: 35 pages
Date of creation: Sep 1996
Date of revision:
Publication status: Forthcoming in Journal of International Economics.
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More information through EDIRC
Invoicing; exchange rate fluctuations; pricing of exports;
Find related papers by JEL classification:
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
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