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The Impact of Exchange Rate Fluctuation on Trade Balance in the Short and Long Run: The Case of Vietnam
- Journal of Southeast Asian Economies (JSEAE)
- ISEAS–Yusof Ishak Institute
- Volume 31, Number 3, December 2014
- pp. 432-452
- Article
- Additional Information
This paper investigates the short- and long-run impact of the real exchange rate on trade balance in Vietnam from 2000 to 2010. The Autoregressive Distributed Lag (ARDL) method is used to explore the long-run impact, and a corresponding Error Correction Model (ECM) based on a long-run cointegration equation examines the impact on trade balance when a real depreciation of the VND has occurred. An Impulse response function based on the ECM exhibits that trade balance takes on a J-curve pattern in the event of a permanent depreciation.