The Research On Exchange Rate Passing Through Using Vector Auto-Regression Models And Threshold Auto-Regression Models

In this paper we analyse the exchange rate pass-through(ERPT)in the euro area as a whole,For that purpose we use VARs with identification based on a combination of 5 variables,they are-GDP,HICP,M3,Unemployment rate and Exchange rate.Our results emphasize that even the pass-through in the euro area is not constant over time and it may depend on a composition of economic shocks governing the exchange rate,but we can figure out which factor matters most.Regarding the relative importance of individual shocks,it seems that pass-through is the strongest when the exchange rate movement is triggered by(relative)Unemployment rate shocks and the exchange rate shocks.Our shock-dependent measure of ERPT points to a large but volatile pass-through to import prices and overall very small pass-through to consumer inflation in the euro area.Since the majority of the data in the economic world are non-linear,so researcher should have figured out a solution(models)which could fit the non-linear datasets.In the previous models,those which could help solving such problems are lacking of some functions somehow to show a better model and prediction.This is the first time that someone invent a combination of two models to give a more precise prediction and overcome that picture a better macroeconomic scenario.