Export pricing strategy of Italian firms: from the depreciation of the lira to the euro

In 1992 and 1995 Italy suffered two currency crisis, which were followed by a gradual recovery that ended with the entry of the lira in the single currency. The aim of this paper is to describe the export pricing strategy of Italian firms. To achieve this goal, a subset of 250 manufacturing firms (based in Northern Italy) out of the 1000 surveyed annually by the Bank of Italy was taken into account. By means of an additional questionnaire it was possible to collect information on a wide range of phenomena, such as the law of one price (LOP), the pass-through, and the pricing to market. Although a large part of the information is only qualitative, it would be appear that, while the 1992 devaluation induced firms to improve their competitiveness, the one that occurred in 1995 was used mainly to increase the mark up. The survey also shows that, in the long run, the LOP is followed only by 42 per cent of firms. Recently the convergence of the level of prices has increased amongst multinational firms and those producing intermediate goods. In February 2000, 45 per cent of firms were consistent with the LOP.