Impact of exchange rate changes on export-import dynamics in Vietnam

Abstract

This study examines the impact of exchange rate changes on Vietnam’s export-import dynamics during a transitioning exchange rate regime. Utilizing the Autoregressive Distributed Lag (ARDL) model, our findings indicate that global income and import levels are crucial in bolstering exports, assuming other variables remain constant. Additionally, we uncover that the real effective exchange rate (REER) and money supply significantly influence import patterns, with a central exchange rate mechanism enhancing export volumes by approximately 0.14% compared to a fixed peg system. The Nonlinear ARDL (NARDL) analysis further reveals the long-term asymmetric impacts of REER on trade. By applying a threshold model, we also explore the effects of global income and import volumes on export structural changes, as well as the influence of money supply and REER on import adjustments. The research concludes with policy suggestions to aid Vietnam’s economic growth and trade sustainability within its exchange rate framework.

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