Threshold Model of the Exchange Rate Pass-Through Effect

Tica, Josip; Posedel, Petra

doi:10.2753/eee0012-8775470603

Cited by 9 publications

(3 citation statements)

References 16 publications

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“…The main objectives of our research are the assessment of the influence of macro factors and the degree of the ERPT on aggregate and disaggregated import prices of industrial sectors in the short-and long-run, i.e., to examine how the degree of the ERPT affects the import prices and the composition of imports by industry and whether the degree of the ERPT is higher with homogeneous products or heterogeneous products. Nevertheless, our research differs, compared with previous empirical research related to Croatia, because they mainly focus on the estimation of the exchange rate regime to degree of ERPT (Darvas, 2001;Billmeier & Bonato, 2002;Tica & Posedel, 2014).…”

Section: Introductionmentioning

confidence: 90%

Exchange Rate Pass-Through into Import Prices of Croatia

Kurtović

Sehic-Krslak

Halili

et al. 2018

Naše Gospodarstvo/Our Economy

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The main goal of this paper is to examine the influence of macro factors and the degree of the exchange rate pass-through (ERPT) on aggregate and disaggregate import prices of the industrial sectors in the short- and long-run. The study is based on a model used by Campa and Goldberg (2002) and Campa et al. (2005). The ERPT is determined by applying the single equation and the cointegration approach (autoregressive distributed lag model [ARDL]), vector decomposition, and data over the period from 2002Q1 to 2016Q4. In the long-run, the ERPT is complete for the aggregate import and for the industrial sector beverages and tobacco. In the short-run, the ERPT is incomplete for the aggregate import and for majority of industrial sectors. Further, we have discovered that the degree of the ERPT is higher with heterogeneous products than with homogeneous products. Due to the inaccessibility of data for micro factors, we were not able to determine their effect on import prices. The results of our research can help economic policymakers to create adequate measures in the field of economic policies that will improve the competitiveness of the economy. Finally, this paper identified the effect of the volatility degree of the ERPT on the disaggregate import prices of industrial sectors that has not been sufficiently explored so far.

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Section: Introductionmentioning

confidence: 90%

Exchange Rate Pass-Through into Import Prices of Croatia

Kurtović

Sehic-Krslak

Halili

et al. 2018

Naše Gospodarstvo/Our Economy

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“…Moreover, they found that the size eff ect is more signifi cant than the direction eff ect. Tica and Posedel (2009) showed that the EPRT is asymmetric around a particular threshold value, and the EPRT eff ect is strong and signifi cant above the threshold, but the EPRT is weak in Croatia below the threshold. Alvarez et al (2012) found a complete and non-declining pass-through to import prices but weak evidence of asymmetric pass-through from appreciation vs. depreciation in both the short run and long run.…”

Section: Literature Reviewmentioning

confidence: 99%

Asymmetries in Exchange Rate Pass-through in Turkey: A Threshold VAR Analysis

Türel¹,

Orhan²

2022

Prague Economic Papers

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This paper analyses the asymmetric behaviour of exchange rate pass-through in Turkey using a threshold VAR model. The main purpose is to examine the asymmetries in the exchange rate pass-through based on size, direction and inflationary environment of an emerging market economy with a highly depreciated domestic currency and two-digit inflation rate. Monthly exchange rate movements and monthly inflation rates were used as threshold variables. Nonlinear impulse response functions were employed to compare upper and lower regimes. According to our findings, the transmission of exchange rate shocks to domestic inflation in the upper regime is stronger than that in the lower regime. The pass-through increases with the magnitude of shocks. Besides, positive shocks have more effect on domestic prices than negative shocks, especially in the upper regime. A positive relationship between inflation and exchange rate pass-through exists. During high inflation periods, pass-through to domestic prices increases.

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“…The presumed inability to model the primary FX rate time series because of its non-stationarity, non-normality, heteroscedasticity, and the presence of frequent structural breaks in the time series has motivated several other authors to model the FX returns instead, and to pursue various ARCH (Autoregressive Conditional Heteroscedasticity), TAR (Threshold Autoregression) and VAR (Vector Autoregression) approaches (Posedel 2006, Tica and Posedel 2009, Erjavec et al 2012. Earlier exchange rate -inflation pass-through research did not come to converging results regarding the endogeneity of the exchange and inflation rate (Choudhri and Hakura 2001, Cukierman, Miller, and Neyapti 2002, Devereux and Engel 2003, Gagnon and Ihrig 2004, Mihaljek and Klau 2008.…”

Section: Literature Reviewmentioning

confidence: 99%