| Abstract: |
The paper analyzes how the choice of the invoicing currency used in
international transactions by the Italian companies influences the
transmission of exchange rates shocks to their price strategies and business
activity. Companies invoicing in euros tend to not adjusting the prices of
exported goods; in this case the exchange rate fluctuations are transmitted
almost entirely to the prices of their goods in the destination countries,
also inducing a large response of the exported volumes. On the other hand,
companies that invoice in local currency transmit weakly the exchange rate
fluctuations to prices in destination markets and therefore attenuate the
impacts on exports volumes. Fixing prices in foreign currency is more frequent
among larger and more productive companies, which tend to transfer the
exchange rate shocks mostly on unit margins. Overall, despite the different
transmission channels, the effect of exchange rate fluctuations on foreign
turnover in euros, is quite similar among the different pricing strategies. |