FES International Research Seminar with Dennis Novy, Warwick University, UK
Our next speaker in the FES International Seminar Series is Dennis Novy who is an Associate Professor of Economics at the University of Warwick and a Research Fellow at the Centre for Economic Policy Research (CEPR).
Dennis Novy is an Associate Professor of Economics at the University of Warwick and a Research Fellow at the Centre for Economic Policy Research (CEPR). He is also an Associate at the Centre for Economic Performance (CEP) at the London School of Economics. He was appointed to the UK Council of Economic Advisers by the Chancellor of the Exchequer in 2018.
His main research interests are international trade, international economics and macroeconomics.
At the FES International Research Seminar Dr.Novy presented his research "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 transactions in our sample invoiced in neither sterling nor the exporter’s currency. We then study the relationship between invoicing currency choices and the response of import prices to exchange rate changes. We find that for transactions invoiced in a vehicle currency, import prices are much more sensitive to changes in the vehicle currency than in the bilateral exchange rate. Pass-through therefore substantially increases once we account for vehicle currencies. Our results help to explain the higher-than-expected pass-through into import prices during the Great Recession and after the EU referendum. Finally, within a theoretical framework we conceptualize an omitted variable bias arising in estimating pass-through with only bilateral exchange rates under vehicle currency pricing. Overall, our results contribute to understanding the disconnect between exchange rates and prices.
The FES International Research Seminar organisers are: Eren Arbatli (Ph.D, Assistant Professor of Department of Theoretical economics FES HSE) and Madina Karamysheva (Ph.D, Assistant Professor of the School of Finance FES HSE)