Pricing to Market at firm level

Abstract

This paper analyzes the influence of exchange rate variations on prices in foreign and home markets using firm data. The theoretical benchmark, based on the literature of pricing to market, also takes into account some hypotheses about the effects of demand variations and market power on prices. The empirical analysis for the Spanish economy points out the positive impact of the devaluations o f the domestic currency on the relative evolution o f prices, though smaller than obtained in previous evidence using aggregated data. The results also suggest a procyclical behavior.