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Exchange-Rate Pass-Through and Invoicing Currency Choice in International Production Networks

Author

Listed:
  • Ferrari, Alessandro
  • Freitag, Andreas
  • Kammerlander, Eric
  • Lein, Sarah
  • Pisch, Frank

Abstract

We study exchange-rate pass-through and currency choice in international transactions, focusing on bilateral bargaining power in relationships between domestic buyers and foreign suppliers. Using detailed transaction-level data on Swiss imports from 2014–2023 identifying buyers and suppliers, we show that exchange-rate pass-through is lower for economically important suppliers within a buyer’s network. This pattern is explained by a higher likelihood of invoicing in the buyer’s currency, consistent with a bilateral bargaining model of price setting and endogenous currency choice. Our results imply that bilateral bargaining power shapes how foreign shocks affect prices and external adjustment, making policy transmission network-dependent.

Suggested Citation

  • Ferrari, Alessandro & Freitag, Andreas & Kammerlander, Eric & Lein, Sarah & Pisch, Frank, 2026. "Exchange-Rate Pass-Through and Invoicing Currency Choice in International Production Networks," CEPR Discussion Papers 21144, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:21144
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    Keywords

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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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