Nonlinear exchange rate pass-through to inflation in Vietnam: a tvar model approach

Pham Thi Tuyet Trinh, To Ngoc Linh
Received: 18/07/2017   Revised: 12/08/2017   Accepted: 20/08/2017   Mã số: E31 . E52 . E58 . F31 . F41.
Abstract: The study analyses nonlinear exchange rate pass-through (ERPT) to inflation in Vietnam with monthly basis of inflation rate as a threshold variable. By employing threshold vector autoregression (TVAR) model and monthly data in period 2008-2015, the study finds nonlinear form of ERPT with two threshold values of month-on-month inflation at 0.336 percent and 0.620 percent. ERPT to inflation is significantly complete at 1 percent after 7 months when inflation rate is above the latter but negligible or insignificant when inflation rate is below the latter. Exchange rate fluctuation is one of determinants of inflation at various contributions depending on the level of inflation.
Keywords: exchange rate pass-through (ERPT), threshold vector autoregression (TVAR), nonlinearity, Vietnam.
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