Exports and Invoicing: Evidence from the 2015 Swiss Franc Appreciation

Abstract

Do differences in border price adjustment by currency of invoicing carry over to allocations? We document the cross-industry variation in the response of Swiss export prices and export values by currency of invoicing of border prices in the aftermath of the large and abrupt Swiss franc (CHF) appreciation in January 2015. Industries with higher CHF-invoicing shares (and a larger increase in foreign-currency denominated prices) experienced substantially weaker export growth in the two-year period after January 2015.

Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation

“…The last observation on allocations complements our findings inAuer et al (2019) that EUR-invoiced products experienced less of a decline in export values when compared with CHF-invoiced industries. Interestingly, the link between invoicing and export response shown inAuer et al (2019) is stronger at longer horizons, whereas the link between invoicing and import share changes that we document in this paper is stronger at shorter horizons.…”

“…10 Differences in currency of invoicing at the border also carry over to allocations in the export side. In the context of the CHF appreciation, Auer et al (2019) show that export growth in 2015 was larger in industries with higher EUR invoicing of export border prices. Cravino (2017) uses data on Chilean exports to estimate the differential response of exports to exchange rate shocks according to the invoicing currency of the transaction.…”

What Are the Price Effects of Trade? Evidence From the U.S. and Implications for Quantitative Trade Models

“…8 For our purposes, scanner data such as those used by Bai and Stumpner (2018) suffer from certain drawbacks: (a) the sample covers consumer packaged goods (about 10% of total expenditures) and is not representative of several important Second, our estimates of the benefits of trade with China for consumers through lower prices complement a large literature that has documented adverse effects for employment (e.g., Autor et al (2013), Autor et al (2014), Pierce and Schott (2016a) and Bloom et al (2019)), mortality (Pierce and Schott (2016b)), marriage, fertility and children's living circumstances (Autor et al (2018)), domestic innovation and investment and Autor et al (2019)), and political polarization (Autor et al (2016)). Third, by showing importance of the "pro-competitive effects of trade" to explain the observed price response, our paper is part of a large literature that has estimated the empirical relationship between international trade and markups (e.g., Levinsohn (1993), Krishna and Mitra (1998), Nakamura and Zerom (2010), Feenstra and Weinstein (2017), Arkolakis et al (2018), Auer et al (2018) and Amiti et al (2018b)) and that has examined the extent to which opening up to trade may reduce markup distortions (e.g., Brander and Krugman (1983), Atkeson and Burstein (2008), Epifani and Gancia (2011), Edmond et al (2015), Feenstra (2018), and Impullitti and Licandro (2018)). Finally, our findings speak to a growing literature on the distributional effects of trade via the expenditure channel (e.g., Porto (2006) and He (2018), and the aforementioned studies).…”

Import prices and invoice currency: Evidence from Chile

“…Burstein et al (2007) is a seminal study of this kind, focusing on Argentina's large devaluation in early 2002. The appreciation of the Swiss Franc in January 2015 represented a recent, relatively clean, nominal natural experiment, exploited by Auer et al (2018) or Bonadio et al (2018).…”