Sectoral Exchange Rate Pass-through to Manufacturing Prices: A GVAR Approach

Júnior, Sérgio Kannebley; Prince, Diogo de; Costa, Fernanda da Serra

doi:10.1007/s11079-023-09711-y

Cited by 2 publications

(2 citation statements)

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“…(2020) derive predictions for non-US countries that ERPT to import prices should be high and driven by the dollar exchange rate instead of the bilateral exchange rate. The Brazilian case corroborates these predictions by Choudhri and Hakura (2015), Kannebley Júnior, Godoi, and Prince (2022) and Kannebley et al. (2023) [26].…”

Section: Discussion Of Resultssupporting

confidence: 74%

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Pricing-to-market of Brazilian exports: a case of vehicle currency invoicing

Kannebley Júnior,

Prince,

Silva

2023

ECON

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PurposeBrazil uses the dollar as a vehicle currency to invoice its exports. This fact produces a tendency toward equalizing the prices of products in dollars in the international market and reducing the ability of firms to practice pricing-to-market (PTM). This study aims to evaluate the hypothesis by estimating error correction models in panel data, obtaining estimates of PTM for 25 manufacturing products exported by Brazil between 2010 and 2020.Design/methodology/approachThis study uses the correlated common effect estimator proposed by Pesaran (2006) and Chudik and Pesaran (2015b) to estimate the PTM coefficients.FindingsResults of this study indicate that exporters practice local-currency pricing stability for dollar prices. This study obtains that Brazilian exporters tend to stabilize their dollar price for exports, reducing heterogeneity between destination markets. The results are in agreement with the hypothesis of the prevalence of the coalescing effect of Goldberg and Tille (2008) and lower sensitivity of the markup adjustment to the specific market, as pointed out by Corsetti et al. (2018). The pricing of Brazilian exports in dollars reflects a profit maximization strategy that considers an international price system based on global demand for products.Originality/valueIn addition to analyzing the dollar role in the pricing of Brazilian exports through the triangular decomposition, this study also shows the importance of examining the cross-section dependence of errors, considering the heterogeneous cointegration in export pricing models and producing PTM estimates for short-term and long-term.

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Section: Discussion Of Resultssupporting

confidence: 74%

“…26. These authors find a range of estimates from complete pass-through (Choudhri & Hakura, 2015) to degrees of pass-through to import prices between 73% and 76%, respectively, in Kannebley Jr et al. (2023) and Kannebley Júnior et al.…”

Section: Notesmentioning

confidence: 99%