EFZG working paper series, No. 15, 2007.
Other
Threshold Autoregressive Model of Exchange Rate Pass through Effect: the Case of Croatia
Petra Posedel
; Faculty of Economics and Business, University of Zagreb
Josip Tica
orcid.org/0000-0001-7937-1573
; Faculty of Economics and Business, University of Zagreb
Abstract
In this paper exchange rate pass-through effect in Croatia is estimated with nonlinear (asymmetric) threshold
autoregressive model (TAR). In total 12285 regressions is estimated and a strong case of nonlinearity with
single threshold is proven. According to our estimation there is a threshold at 2.69% of monthly change of
nominal exchange rate of German mark (Euro) and the way in which nominal exchange rate affects inflation is
asymmetric around it. Below the threshold, effect of change in nominal exchange rate on inflation is
statistically insignificant and above the threshold the effect is strong and significant.
Keywords
threshold autoregressive model; pass-through effect; exchange rate; inflation; nonlinear econometrics
Hrčak ID:
137174
URI
Publication date:
1.10.2007.
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