The Role of Exchange Rate in Supporting Trade Balance in Vietnam

Lan Huong Hoang
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Lan Huong Hoang: State Bank of Vietnam

No 16-2016, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

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.

Pages: 27 pages
Date: 2016-10
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Citations: View citations in EconPapers (3)

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