Vehicle Currency Pricing and Exchange Rate Pass-Through

Abstract Using detailed firm-level transactions data for UK imports, we find that invoicing in a vehicle currency is pervasive, with more than half of the our sample invoiced neither sterling nor exporter’s currency. We then study relationship between currencies and response import unit values to exchange rate changes. currency, are much sensitive changes bilateral rate. Pass-through therefore substantially increases once account currencies. This result helps explain why inflation turned out higher expected when depreciated during Great Recession after Brexit referendum. Finally, within conceptual framework, show rates not suitable capturing pass-through under pricing. Overall, results help clarify literature often finds disconnect prices accounted for.