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Firms exporting to foreign markets face a particular challenge: to price their exports in a foreign market when the exchange rate changes. This paper takes on pricing-to-market using a unique data set that covers fi rm level monthly trade at great detail. As opposed to annual trade flows, monthly trade flows bring us closer to the transaction level where fi rm pricing decisions are actually made. I fi nd that the utilization of monthly data does add new information about the average level of pricing-to-market, and differences between long-run and short-run pricing-to-market. Furthermore, I fi nd industry differences in pricing-to-market in terms of the magnitude (zero to complete pricing-to-market) as well as the timing and dynamic response structure (i.e. when do fi rms changes prices), and that pricing-to-market is stronger on high-income markets. |
