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The Impact Of Exchange Rate Fluctuation On Trade Balance In Short And Long Run

Author

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  • PHAM THI TUYET TRINH

    (Banking University of Hochiminh City Vietnam)

Abstract

This study shows the short and long-run impact of exchange rate on trade balance in Vietnam. Following a depreciation of real exchange rate, trade balance initially deteriorates. Trade balance will improve after four quarters and new equilibrium will be set after twelve quarters. Autoregressive distributed lag (ADRL) are used to explore long-run impact, showing trade balance improvement when real exchange rate depreciates. Corresponding error correction model (ECM) based on long-run cointegration equation indicates immediate deterioration of trade balance after a depreciation. Impulse response functions based ECM exhibit J-curve pattern of trade balance when there is a permanent depreciation.

Suggested Citation

  • Pham Thi Tuyet Trinh, 2012. "The Impact Of Exchange Rate Fluctuation On Trade Balance In Short And Long Run," Working Papers 23, Development and Policies Research Center (DEPOCEN), Vietnam.
    • Handle: RePEc:dpc:wpaper:2312
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    Cited by:

    1. Cuong Xuan Dinh & Toan Nguyen, 2016. "Exchange Rate Variations and Agricultural Exports in Vietnam," Accounting and Finance Research, Sciedu Press, vol. 5(2), pages 1-54, May.
    2. Mansour Zarra-Nezhad & Amin Mansouri, 2014. "Impact of spatial effect on volatility of trade," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 4(7), pages 358-368, July.

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