Threshold Autoregressive Model of Exchange Rate Pass through Effect: The Case of Croatia

Petra Posedel Šimović () and Josip Tica

No 715, EFZG Working Papers Series from 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 (search for similar items in EconPapers)
JEL-codes: E31 E58 F31 (search for similar items in EconPapers)
Pages: 12
Date: 2007-10-01
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac, nep-mon and nep-tra
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Citations: View citations in EconPapers (2)

Published in Josip Tica & Petra Posedel, 2009. "Threshold Model of the Exchange Rate Pass-Through Effect", Eastern European Economics, M.E. Sharpe, Inc., vol. 47(6), pages 43-59, November

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Persistent link: https://EconPapers.repec.org/RePEc:zag:wpaper:0715

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