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

Listed author(s):
  • Aleem, Abdul
  • Lahiani, Amine

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.

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File URL: http://www.sciencedirect.com/science/article/pii/S0275531913000238
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Article provided by Elsevier in its journal Research in International Business and Finance.

Volume (Year): 30 (2014)
Issue (Month): C ()
Pages: 24-33

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Handle: RePEc:eee:riibaf:v:30:y:2014:i:c:p:24-33
DOI: 10.1016/j.ribaf.2013.05.001
Contact details of provider: Web page: http://www.elsevier.com/locate/ribaf

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