The paper analyzes how the choice of the invoicing currency used in international transactions by the Italian companies (euro, dollar, other currencies) influences the transmission of exchange rates shocks to their price strategies and business activity. It finds that the decision of fixing prices in a particular currency is connected to a number of firms' features (for example, its size and productivity); it follows that companies react differently to shocks on exchange rates.
After an exchange rate shock, companies invoicing in euro tend to not adjusting the price of exported goods and those that invoice in the currency of the foreign market do so only marginally. It follows that in the first case the shock is transmitted almost entirely to the prices in the countries of destination, inducing strong variations in the quantities sold; in the latter there are reduced effects on export volumes but the unit margins (in euro) fluctuate significantly.
