Invoicing currency, exchange rate pass‐through, and value‐added trade: The case of Turkey

We explore the role of invoicing currency and global production integration in the effect of exchange rate pass‐through on import and export prices. We use 3‐digit product‐level data classified by end use and 2‐digit sector‐level data displaying varying integration with global value chains from an e...

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Bibliographic Details
Published in:International journal of finance and economics 2023-10, Vol.28 (4), p.4401-4419
Main Author: Saygılı, Hülya
Format: Article
Language:English
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Summary:We explore the role of invoicing currency and global production integration in the effect of exchange rate pass‐through on import and export prices. We use 3‐digit product‐level data classified by end use and 2‐digit sector‐level data displaying varying integration with global value chains from an emerging country, Turkey. Overall, pass‐through rate significantly affects both export and import prices. Contrary to the literature, pass‐through is significantly higher for local currency‐priced goods. The relative rate of pass‐through to the U.S. dollar and euro‐priced goods is determined by the type of products and value‐added trade. Stronger integration with global value chains and the use of a vehicle currency tend to smooth out the response of domestic prices to changes in exchange rates.
ISSN:1076-9307
1099-1158
DOI:10.1002/ijfe.2657