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I am currently working on a project where I am looking at how prices are affected by changes in the exchange rates. For an example, I want to see how a change in my currency (Norwegian Kroner) affects our salesprice in foreign currency in places like France and Italy (in euros).

I want to find the effects the exchange rate have on the salesprice. Should I make a correlation matrix with (1) logarithm of first difference, (2) logarithm or (3) the normal salesprice in euro?

Thanks a lot.

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Compute the natural logarithm of each price, then subtract them to get the ratio of the change. Then compare the Kroner ratios to the euro ratios. Unlike x1/x2, ln(x1)-ln(x2) is symmetric for price increases and decreases.

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