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The Role of Exchange Rate in Supporting Trade Balance in Vietnam

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  • Lan Huong Hoang

    (State Bank of Vietnam)

Abstract

In this paper, I apply a multivariate Structural Vector Autoregressive (SVAR) and Vector Error correction model (VECM) to analyse short-term and long-term effects of foreign exchange rate on trade balance of Vietnam, using monthly data from 2004-2015. Real effective exchange rate is used to reflect overall performance of Vietnam’s currency. The results suggest that in short-term, exchange rate has very limited impacts on trade flows; while in longer horizon, it does not affect imports in either nominal or real terms but has strong effect on nominal exports. To the extent of this research, there is a number of policy implications has been made to support policy makers in Vietnam.

Suggested Citation

  • Lan Huong Hoang, 2016. "The Role of Exchange Rate in Supporting Trade Balance in Vietnam," IHEID Working Papers 16-2016, Economics Section, The Graduate Institute of International Studies.
    • Handle: RePEc:gii:giihei:heidwp16-2016
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    Cited by:

    1. Ho, Sy-Hoa & Nguyen, Trung-Thanh & To-The, Nguyen, 2020. "Asymmetry and Symmetry of real exchange rate effect on the bilateral trade balance between Vietnam and the United States: aggregated and disaggregated levels of investigation," MPRA Paper 98416, University Library of Munich, Germany.
    2. Junaid Masih & Dongsheng Liu & Javed Pervaiz, 2018. "The Relationship between RMB Exchange Rate and Chinese Trade Balance: Evidence from a Bootstrap Rolling Window Approach," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(2), pages 35-47, February.
    3. Yu Hsing & Minh Q. Huynh, 2019. "Effects of Depreciation and Appreciation of the Vietnamese Dong on Aggregate Output," Business and Economic Research, Macrothink Institute, vol. 9(2), pages 45-56, June.

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