Khieu Van, Hoang (2013): The effects of the real exchange rate on the trade balance: Is there a J-curve for Vietnam? A VAR approach. Published in: Asian Journal of Empirical Research , Vol. 3, No. August (1 August 2013): pp. 1020-1034.
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Abstract
This study employs a reduced-form VAR model to estimate trade balance’s responses to a positive shock to the real VND/USD exchange rate. For this purpose, we apply identification restrictions based on the conclusion by Krugman, Obstfeld and Melitz (2012), and on the theory of the AA-DD model to estimate the impulse response functions of the trade balance. We use a monthly data set of four endogenous variables and two exogenous variables from January 1995 to December 2012. Since the data of two endogenous variables is unavailable in monthly basis, we interpolate those series using Chow and Lin’s (1971) annualized approach from their annual series. Overall, we find that there exists a J-curve for Vietnam, and its effect lasts for 11 months. Particularly, the worsening effect on the trade balance becomes most severe in the third and the fourth months.
Item Type: | MPRA Paper |
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Original Title: | The effects of the real exchange rate on the trade balance: Is there a J-curve for Vietnam? A VAR approach. |
English Title: | The effects of the real exchange rate on the trade balance: Is there a J-curve for Vietnam? A VAR approach. |
Language: | English |
Keywords: | J-curve; Trade balance; Real exchange rate; VAR; Vietnam. |
Subjects: | F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements |
Item ID: | 54490 |
Depositing User: | Mr Hoang Khieu |
Date Deposited: | 19 Mar 2014 14:49 |
Last Modified: | 27 Sep 2019 09:38 |
References: | 1. Ahmad, J., & Yang, J. (2004). Estimation of the J-curve in China. Economics Series East West Center Working Papers. 2. Chow, G.C., & Lin, A. (1971). Best Linear Unbiased Interpolation, Distribution, and Extrapolation of Time Series by Related Series. The Review of Economics and Statistics, Vol. 53, No. 4, p.372-375. 3. Krugman, P.R., Obstfeld, M., & Melitz, M.J. (2012). International Economics: Theory and Policy, Ninth Edition, p.428-437 & p.447-449. Addison-Wesley. 4. Petrović, P., & Gligorić, M. (2012). Exchange Rate and Trade Balance: J-curve Effect. PANOECONOMICUS, Vol. 1, p.23-41. 5. Stučka, T. (2004). The Effects of Exchange Rate Change on the Trade Balance in Croatia. IMF Working Paper, WP/04/65. 6. Yuen-Ling, N., Wai-Mun, H., & Geoi-Mei, T. (2008). Real Exchange Rate and Trade Balance Relationship: An Empirical Study on Malaysia. International Journal of Business and Management, Vol 3, No. 8, p.130-137. |
URI: | https://mpra.ub.uni-muenchen.de/id/eprint/54490 |