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Real Effective Exchange Rate, Broad Money Supply, and Trade Balance in Vietnam: An Empirical Analysis from Bounds Test to a Cointegration Approach

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  • Dao, Kieu Oanh
  • Nguyen, V.C.
  • Dinh, Si Tri Nhan

Abstract

This paper aims to investigate the impact of the real effective exchange rate and broad money supply on the trade balance in Vietnam using quarterly data from the first quarter of 2000 to the fourth quarter of 2018. Using the ARDL-ECM approach to investigate this effect, a cointegration relationship exists between real effective exchange rate, broad money supply and trade balance. Results demonstrate that real effective exchange rate has a short-term negative impact on trade balance. Additionally, broad money supply has a positive impact on trade balance in the short run and long run with a very weak effect. Surprisingly, it was found that real foreign income and local income have no impact on trade balance.

Suggested Citation

  • Dao, Kieu Oanh & Nguyen, V.C. & Dinh, Si Tri Nhan, 2020. "Real Effective Exchange Rate, Broad Money Supply, and Trade Balance in Vietnam: An Empirical Analysis from Bounds Test to a Cointegration Approach," OSF Preprints ze89s, Center for Open Science.
    • Handle: RePEc:osf:osfxxx:ze89s
    DOI: 10.31219/osf.io/ze89s
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    References listed on IDEAS

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