Threshold Autoregressive Model of Exchange Rate Pass through Effect: The Case of Croatia
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.
|Date of creation:||01 Oct 2007|
|Date of revision:|
|Publication status:||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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