IDEAS home Printed from https://ideas.repec.org/p/nzb/nzbdps/2016-01.html
   My bibliography  Save this paper

How exporters set prices: evidence from a large behavioural survey

Author

Abstract

This paper uses a survey of 1281 New Zealand exporters to investigate the role of firm characteristics in setting export prices. Larger, and more pro-ductive firms, are more likely to differentiate prices across markets. Primary sector firms are more likely to price to market than firms in other sectors, even taking into account other firm characteristics. This contrasts sharply with the commonly-held view that the price of these products is determined on the international market. In a further contribution to the literature, we find that service sector firms can also price to market, at similar rates to manufacturers manufacturers.

Suggested Citation

  • Miles Parker, 2016. "How exporters set prices: evidence from a large behavioural survey," Reserve Bank of New Zealand Discussion Paper Series DP2016/01, Reserve Bank of New Zealand.
    • Handle: RePEc:nzb:nzbdps:2016/01
    as

    Download full text from publisher

    File URL: http://www.rbnz.govt.nz/-/media/ReserveBank/Files/Publications/Discussion%20papers/2016/dp16-01.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Mary Amiti & Oleg Itskhoki & Jozef Konings, 2014. "Importers, Exporters, and Exchange Rate Disconnect," American Economic Review, American Economic Association, vol. 104(7), pages 1942-1978, July.
    2. Corsetti, Giancarlo & Dedola, Luca, 2005. "A macroeconomic model of international price discrimination," Journal of International Economics, Elsevier, vol. 67(1), pages 129-155, September.
    3. Fabiani, S. & Druant, M. & Hernando, I. & Kwapil, C. & Landau, B. & Loupias, C. & Martins, F. & Mathä, T. & Sabbatini, R. & Stahl, H. & Stockman, A., 2005. "The Pricing Behaviour of Firms in the Euro Area: New Survey Evidence," Working papers 135, Banque de France.
    4. Andrew Atkeson & Ariel Burstein, 2008. "Pricing-to-Market, Trade Costs, and International Relative Prices," American Economic Review, American Economic Association, vol. 98(5), pages 1998-2031, December.
    5. Goldberg, Linda & Tille, Cédric, 2013. "A bargaining theory of trade invoicing and pricing," Kiel Working Papers 1839, Kiel Institute for the World Economy (IfW Kiel).
    6. Nicolas Berman & Philippe Martin & Thierry Mayer, 2012. "How do Different Exporters React to Exchange Rate Changes?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 127(1), pages 437-492.
    7. Gita Gopinath & Oleg Itskhoki & Roberto Rigobon, 2010. "Currency Choice and Exchange Rate Pass-Through," American Economic Review, American Economic Association, vol. 100(1), pages 304-336, March.
    8. Devereux, Michael B. & Engel, Charles & Storgaard, Peter E., 2004. "Endogenous exchange rate pass-through when nominal prices are set in advance," Journal of International Economics, Elsevier, vol. 63(2), pages 263-291, July.
    9. Goldberg, Linda S. & Tille, Cédric, 2008. "Vehicle currency use in international trade," Journal of International Economics, Elsevier, vol. 76(2), pages 177-192, December.
    10. Julien Martin & Isabelle Méjean, 2012. "Invoicing Currency, Firm Size, and Hedging," Working Papers 2012-28, CEPII research center.
    11. Richard Fabling & Arthur Grimes, 2015. "Over the Hedge: Do Exporters Practice Selective Hedging?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 35(4), pages 321-338, April.
    12. Linda S. Goldberg & Cédric Tille, 2009. "Micro, macro, and strategic forces in international trade invoicing," Staff Reports 405, Federal Reserve Bank of New York.
    13. Arpita Chatterjee & Rafael Dix-Carneiro & Jade Vichyanond, 2013. "Multi-product Firms and Exchange Rate Fluctuations," American Economic Journal: Economic Policy, American Economic Association, vol. 5(2), pages 77-110, May.
    14. Burstein, Ariel & Gopinath, Gita, 2014. "International Prices and Exchange Rates," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 391-451, Elsevier.
    15. Betts, Caroline & Devereux, Michael B., 1996. "The exchange rate in a model of pricing-to-market," European Economic Review, Elsevier, vol. 40(3-5), pages 1007-1021, April.
    16. Shabtai Donnenfeld & Alfred A. Haug, 2008. "Currency invoicing of US imports," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(2), pages 184-198.
    17. Miles Parker, 2017. "Price-setting behaviour in New Zealand," New Zealand Economic Papers, Taylor & Francis Journals, vol. 51(3), pages 217-236, September.
    18. Friberg, Richard & Wilander, Fredrik, 2008. "The currency denomination of exports -- A questionnaire study," Journal of International Economics, Elsevier, vol. 75(1), pages 54-69, May.
    19. Raphael Auer & Thomas Chaney, 2009. "Exchange Rate Pass‐Through in a Competitive Model of Pricing‐to‐Market," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(s1), pages 151-175, February.
    20. Richard Fabling & Arthur Grimes & Philip Stevens, 2012. "The relatives are fine: use of qualitative firm data in economic analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 19(7), pages 615-618, May.
    21. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
    22. repec:hal:spmain:info:hdl:2441/651f8db8eu86bpej8g9cb795ud is not listed on IDEAS
    23. Michael B. Devereux & Shouyong Shi, 2013. "Vehicle Currency," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 97-133, February.
    24. Giancarlo Corsetti & Luca Dedola, 2002. "Macroeconomics of international price discrimination," International Finance Discussion Papers 744, Board of Governors of the Federal Reserve System (U.S.).
    25. Doireann Fitzgerald & Stefanie Haller, 2014. "Pricing-to-Market: Evidence From Plant-Level Prices," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(2), pages 761-786.
    26. Silvia Fabiani & Martine Druant & Ignacio Hernando & Claudia Kwapil & Bettina Landau & Claire Loupias & Fernando Martins & Thomas Mathä & Roberto Sabbatini & Harald Stahl & Ad Stokman, 2006. "What Firms' Surveys Tell Us about Price-Setting Behavior in the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
    27. Dornbusch, Rudiger, 1987. "Exchange Rates and Prices," American Economic Review, American Economic Association, vol. 77(1), pages 93-106, March.
    28. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    29. Richard Fabling & Lynda Sanderson, 2015. "Export Performance, Invoice Currency and Heterogeneous Exchange Rate Pass-through," The World Economy, Wiley Blackwell, vol. 38(2), pages 315-339, February.
    30. Roxanne Clemens & Bruce A. Babcock, 2004. "Country of Origin as a Brand: The Case of New Zealand Lamb," Center for Agricultural and Rural Development (CARD) Publications 04-mbp9, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    31. Li, Hongbin & Ma, Hong & Xu, Yuan, 2015. "How do exchange rate movements affect Chinese exports? — A firm-level investigation," Journal of International Economics, Elsevier, vol. 97(1), pages 148-161.
    32. Greenslade, Jennifer & Parker, Miles, 2010. "New insights into price-setting behaviour in the United Kingdom," Bank of England working papers 395, Bank of England.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fracasso, Andrea & Secchi, Angelo & Tomasi, Chiara, 2022. "Export pricing and exchange rate expectations under uncertainty," Journal of Comparative Economics, Elsevier, vol. 50(1), pages 135-152.
    2. Burstein, Ariel & Gopinath, Gita, 2014. "International Prices and Exchange Rates," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 391-451, Elsevier.
    3. Gita Gopinath, 2015. "The International Price System," NBER Working Papers 21646, National Bureau of Economic Research, Inc.
    4. A. Auer, Raphael & Chaney, Thomas & Sauré, Philip, 2018. "Quality pricing-to-market," Journal of International Economics, Elsevier, vol. 110(C), pages 87-102.
    5. Natalie Chen & Wanyu Chung & Dennis Novy, 2022. "Vehicle Currency Pricing and Exchange Rate Pass-Through," Journal of the European Economic Association, European Economic Association, vol. 20(1), pages 312-351.
    6. Chen, Natalie & Juvenal, Luciana, 2016. "Quality, trade, and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 100(C), pages 61-80.
    7. Devereux, Michael B. & Dong, Wei & Tomlin, Ben, 2017. "Importers and exporters in exchange rate pass-through and currency invoicing," Journal of International Economics, Elsevier, vol. 105(C), pages 187-204.
    8. Hu, Chenghao, 2024. "Finance dependence and exchange rate pass-through: Empirical evidence from China," Emerging Markets Review, Elsevier, vol. 58(C).
    9. Md Deluair Hossen, 2023. "Exchange Rate Pass-Through and Data Frequency: Firm-Level Evidence from Bangladesh," Papers 2303.04101, arXiv.org.
    10. Fernandes, Ana P. & Winters, L. Alan, 2021. "Exporters and shocks: The impact of the Brexit vote shock on bilateral exports to the UK," Journal of International Economics, Elsevier, vol. 131(C).
    11. Richard Fabling & Lynda Sanderson, 2015. "Export Performance, Invoice Currency and Heterogeneous Exchange Rate Pass-through," The World Economy, Wiley Blackwell, vol. 38(2), pages 315-339, February.
    12. Chung, Wanyu, 2016. "Imported inputs and invoicing currency choice: Theory and evidence from UK transaction data," Journal of International Economics, Elsevier, vol. 99(C), pages 237-250.
    13. Auer, Raphael A. & Schoenle, Raphael S., 2016. "Market structure and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 98(C), pages 60-77.
    14. Bolatto, Stefano & Grazzi, Marco & Tomasi, Chiara, 2022. "Export modes and firms’ adjustments to exchange rate movements," European Economic Review, Elsevier, vol. 141(C).
    15. Michael Devereux & Wei Dong & Ben Tomlin, 2015. "Exchange Rate Pass-Through, Currency of Invoicing and Market Share," Staff Working Papers 15-31, Bank of Canada.
    16. Ha, Jongrim & Marc Stocker, M. & Yilmazkuday, Hakan, 2020. "Inflation and exchange rate pass-through," Journal of International Money and Finance, Elsevier, vol. 105(C).
    17. Victor Lyonnet & Julien Martin & Isabelle Mejean, 2022. "Invoicing Currency and Financial Hedging," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(8), pages 2411-2444, December.
    18. Raphael A. Auer, 2015. "Exchange Rate Pass‐Through, Domestic Competition, and Inflation: Evidence from the 2005–08 Revaluation of the Renminbi," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(8), pages 1617-1650, December.
    19. Nagengast, Arne J. & Bursian, Dirk & Menz, Jan-Oliver, 2021. "Dynamic pricing and exchange rate pass-through: Evidence from transaction-level data," European Economic Review, Elsevier, vol. 133(C).
    20. Winters, L Alan & Fernandes, Ana P., 2018. "The effect of exchange rate shocks on firm-level exports: evidence from the Brexit vote," CEPR Discussion Papers 13253, C.E.P.R. Discussion Papers.

    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

    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:nzb:nzbdps:2016/01. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Reserve Bank of New Zealand Knowledge Centre (email available below). General contact details of provider: https://edirc.repec.org/data/rbngvnz.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.