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A threshold vector autoregression model of exchange rate pass-through in Mexico

Abdul Aleem () and Amine Lahiani

Research in International Business and Finance, 2014, vol. 30, issue C, 24-33

Abstract: Considering nonlinearities in the exchange rate pass-through to domestic prices, this paper estimates exchange rate pass-through in Mexico. We examine responses of domestic prices to a positive one unit exchange rate shock by estimating a threshold vector autoregression (TVAR) model. A monthly rate of inflation of 0.79% acts as a threshold. The exchange rate pass-through to domestic prices is statistically significant above the threshold level of the inflation rate and statistically insignificant below it.

Keywords: Exchange rate pass-through; Prices; Threshold vector autoregression (search for similar items in EconPapers)
JEL-codes: E31 F31 F47 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:30:y:2014:i:c:p:24-33

DOI: 10.1016/j.ribaf.2013.05.001

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