Dollars and sense: The sterling depreciation and UK price competitiveness

an article by Giancarlo Corsetti, Meredith A. Crowley and Lu Han for VOX: CEPR’s Policy Portal

An immediate impact of the Brexit referendum in 2016 was the large, rapid depreciation of the sterling against all other currencies.The weak pound did not boost UK export volumes, but less clear is whether UK firms lowered their ex column by port prices in line with the weaker pound.

This column shows that the UK export price response to depreciation depends on the currency in which UK firms invoice their cross-border transactions. Firms invoicing in sterling gained competitiveness by passing the sterling’s weakness through to prices, unlike firms invoicing in vehicle or destination currencies,which adjusted their mark-ups.

Continue reading

---