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Impacts of Exchange Rate on Vietnam-Japan Trade Balance: A Nonlinear Asymmetric Cointegration Approach

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  • Tran, Thi Ha

Abstract

The paper examines the impacts of exchange rate on Vietnam’s trade balance with Japan based on the employment of industry-level data in a set of linear and nonlinear auto-regressive distributed lag models. Results from the models indicate a degree of bias in regression when using aggregate data and a linear ARDL approach. Among 19 industries under consideration, the NARDL model presents different responses from 16 industries, which account for 40% of imports and 60% of exports between Vietnam and Japan, to exchange rate movements. The trade balance of each industry responds differently towards exchange rate and asymmetric reactions are found in 9 out of 16 industries affected by changes in exchange rate. The model using aggregate data shows that exchange rate positively affects Vietnam-Japan trade balance in case of currency depreciation, whereas currency appreciation has no impact on the trade balance between the two countries. Besides, results of the model using aggregate data reveal that the level of economic activity of Japan exerts positive impacts on Vietnam’s trade balance with Japan.

Suggested Citation

  • Tran, Thi Ha, 2019. "Impacts of Exchange Rate on Vietnam-Japan Trade Balance: A Nonlinear Asymmetric Cointegration Approach," MPRA Paper 93286, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:93286
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    References listed on IDEAS

    as
    1. Bahmani-Oskooee, Mohsen, 1986. "Determinants of international trade flows : The Case of Developing Countries," Journal of Development Economics, Elsevier, vol. 20(1), pages 107-123.
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    4. Bahmani-Oskooee, Mohsen & Baek, Jungho, 2016. "Do exchange rate changes have symmetric or asymmetric effects on the trade balance? Evidence from U.S.–Korea commodity trade," Journal of Asian Economics, Elsevier, vol. 45(C), pages 15-30.
    5. Baek, Jungho, 2014. "Exchange rate effects on Korea–U.S. bilateral trade: A new look," Research in Economics, Elsevier, vol. 68(3), pages 214-221.
    6. Baek, Jungho, 2013. "Does the exchange rate matter to bilateral trade between Korea and Japan? Evidence from commodity trade data," Economic Modelling, Elsevier, vol. 30(C), pages 856-862.
    7. Mohsen Bahmani-Oskooee & Zohre Ardalani, 2007. "Is there a J-Curve at the Industry Level?," Economics Bulletin, AccessEcon, vol. 6(26), pages 1-12.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Trade balance; exchange rate; ARDL; NARDL;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F10 - International Economics - - Trade - - - General
    • F3 - International Economics - - International Finance
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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