DP13282 | Invoicing and Pricing-to-Market: A Study of Price and Markup Elasticities of UK Exporters

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In this paper, we provide novel micro evidence from UK customs transactions which supports the view that the currency in which exports and imports are invoiced is a good proxy for the currency in which firms set prices. First, we document that pricing to market, in the form of destination-specific markup adjustment, is substantial only for export shipments which are invoiced in the destination market's currency. Conversely, we find no destination-specific markup adjustments by firms that invoice a shipment in either their own currency or a vehicle currency. Second, we document that while the aggregate shares of invoicing currencies for the UK's exports and imports are stable over time, firms often change their invoicing currency; this practice is more pronounced for firms that use multiple invoicing currencies, are multi-product, and serve several destinations.