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

Ho, Sy-Hoa and Nguyen, Trung-Thanh and 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.

Abstract

Bilateral trade balance always deserves particular interest of policy makers and economists. In this paper, we examined the asymmetric and symmetric effect of real exchange rate on bilateral trade balance between Vietnam and the US at both aggregated and disaggregated commodity levels. We employed both Linear Autoregressive Distributed Lag (ARDL) and Non-linear ARDL (NARDL) models to a dataset spanning over 18 years. We found that (i) both symmetry and asymmetry of real exchange rates are not significant to explain the total trade balance between Vietnam and the United States; (ii) unlike the insignificant effect on the aggregated level, the empirical evidence at the disaggregated level is mixed and dependent on product category. Our findings reveal that (iii) the claim of unfair trade by using exchange rate from the US Treasury is unclear from our estimations; and (iv) a depreciation of USD (i.e. appreciation of VND) leads the long-run US’s trade balance will improve for 10 commodities, and whereas an appreciation of USD (depreciation of VND), long-run trade balance will improve for 11 commodities. The results suggest that only a number of specific industries will benefit from USD appreciation or depreciation.

• Item Type: MPRA Paper
• Language: English
• Keywords: asymmetry exchange rate; trade balance; ARDL; NARDL
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F40 - General

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