Pricing to Market Behavior: Evidence from Albanian Exporting Firms

This paper delves into the pricing behavior of Albanian exporting firms, analyzing their response to market conditions and exchange rate fluctuations.Drawing inspiration from Krugman's seminal work in 1986, on pricing to market dynamics, the study investigates whether Albanian firms employ similar adaptive pricing strategies observed in larger economies.Recent empirical research suggests that such practices are prevalent in small, open economies like Albania, contrary to earlier assumptions.Utilizing a linear econometric model and quarterly data spanning from 2005 to 2023, the analysis aims to ascertain the extent to which Albanian exporting firms act as price setters in response to market dynamics.Through rigorous empirical analysis, including descriptive statistics, unit root tests, ARDL cointegration analysis, model estimation, hypothesis testing, and robustness checks, the study provides insights into the relationship between pricing behavior and exchange rate movements.The findings highlight the significance of adaptive pricing strategies in global markets and offer implications for policymakers, businesses, and academic researchers.Policymakers can use these insights to formulate effective economic policies, while businesses can make informed decisions regarding pricing strategies and currency risk management in the global marketplace.Moreover, this study contributes to the econometrics and macroeconomics literature, paving the way for future research into pricing behavior and exchange rate dynamics.Overall, it serves as a foundational resource for informed decision-making and further academic inquiry into pricing behavior and exchange rate dynamics in emerging economies like Albania.