IDEAS home Printed from https://ideas.repec.org/p/snb/snbwpa/2024-02.html
   My bibliography  Save this paper

The impact of exchange rate fluctuations on markups - firm-level evidence for Switzerland

Author

Listed:
  • Elizabeth Steiner

Abstract

This paper estimates the impact of exchange rate fluctuations on markups. Firm-level markups are estimated for a comprehensive panel of Swiss manufacturing firms for the period 2012-2017 using a production-function approach. The pass-through of the exchange rate is then estimated using an event-study design exploiting the large, sudden and persistent appreciation of the Swiss franc against the euro in January 2015. The results show that following an appreciation, Swiss manufacturing firms adjust their markup very heterogeneously. Large firms, especially those that invoice in foreign currency or are highly profitable, substantially decrease their markup. Owing to their sheer size, large firms shape the aggregate response. In contrast, the average firm does not respond significantly. This suggests that smaller firms, which are in the majority, are either unable or unwilling to absorb exchange rate movements by adjusting their markup.

Suggested Citation

  • Elizabeth Steiner, 2024. "The impact of exchange rate fluctuations on markups - firm-level evidence for Switzerland," Working Papers 2024-02, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2024-02
    as

    Download full text from publisher

    File URL: https://www.snb.ch/en/publications/research/working-papers/2024/working_paper_2024_02
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Markup; Exchange rate; Pass-through; Firm-level data;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:snb:snbwpa:2024-02. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Enzo Rossi (email available below). General contact details of provider: https://edirc.repec.org/data/snbgvch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.