Impact of Exchange Rate on Vietnam-China Bilateral Trade: Findings from ARDL Approach

Pham, Tuan and Tran, Thi Ha (2018): Impact of Exchange Rate on Vietnam-China Bilateral Trade: Findings from ARDL Approach.

Abstract

Using both aggregate and disaggregate data, the purpose of this study was to examine the effects of VND/CNY exchange rate (including exchange rate level and volatility) on trade flows between Vietnam and China. For this analysis, Autoregressive Distributed Lag (ARDL) model is applied. In the disaggregate models, long-run results indicate that 9 import commodities (approximately 28.67% of total import value) are sensitive to real exchange rate level, and 9 export commodities (approximately 39,146% of total export value) also respond to changes in exchange rate level. Most of unaffected commodities are raw, intermediate, and simply processed products (the biggest component in total import volume). In addition, the study found that export commodities are more sensitive to exchange rate volatility than import commodities. Notably, the results of aggregate model indicate that there is no statistical evidence of any linkage between exchange rate and trade (export and import). In other words, exchange rate is likely to be ineffective to improve trade balance between Vietnam and China. This is noticeable signal in term of effective coordination between the monetary and trade policy of Vietnam

• Item Type: MPRA Paper
• Language: English
• Keywords: Vietnam, China, Exchange Rate, Import, Export, ARDL
• Subjects: E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; F - International Economics > F1 - Trade; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance

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