IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/hal-03126494.html
   My bibliography  Save this paper

Exchange Rate Risk Premium in Vietnam

Author

Listed:
  • Ly Dai Hung

    (Vietnam Institute of Economics, Hanoi, Vietnam)

Abstract

We characterize the exchange rate risk premium on the context of a small open economy with controlled floating exchange rate regime. The risk premium is varying over time, and is increasing on inflation, decreasing on output growth, increasing on foreign direct investment capital inflows, and decreasing on the credit growth. The model can account for nearly 94% of risk premium on case study of USD forward selling contract in 11/2018. The evidence is based on a Time-Varying-Coefficients VAR model on a data set covering 85 observations over 02/2012-02/2019 in Vietnam.

Suggested Citation

  • Ly Dai Hung, 2019. "Exchange Rate Risk Premium in Vietnam," Working Papers hal-03126494, HAL.
    • Handle: RePEc:hal:wpaper:hal-03126494
    Note: View the original document on HAL open archive server: https://hal.science/hal-03126494
    as

    Download full text from publisher

    File URL: https://hal.science/hal-03126494/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Rey, Hélène, 2015. "Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence," CEPR Discussion Papers 10591, C.E.P.R. Discussion Papers.
    2. Ly Dai Hung, 2021. "Output-inflation Trade-off in the Presence of Foreign Capital: Evidence for Vietnam," South Asian Journal of Macroeconomics and Public Finance, , vol. 10(2), pages 179-192, December.
    3. Emmanuel Farhi & Matteo Maggiori, 2018. "A Model of the International Monetary System," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 133(1), pages 295-355.
    4. Svensson, Lars E. O., 1992. "The foreign exchange risk premium in a target zone with devaluation risk," Journal of International Economics, Elsevier, vol. 33(1-2), pages 21-40, August.
    5. Mark, Nelson C., 1985. "On time varying risk premia in the foreign exchange market: An econometric analysis," Journal of Monetary Economics, Elsevier, vol. 16(1), pages 3-18, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jiang, Zhengyang, 2021. "US Fiscal cycle and the dollar," Journal of Monetary Economics, Elsevier, vol. 124(C), pages 91-106.
    2. Ca' Zorzi, Michele & Dedola, Luca & Georgiadis, Georgios & Jarociński, Marek & Stracca, Livio & Strasser, Georg, 2020. "Monetary policy and its transmission in a globalised world," Working Paper Series 2407, European Central Bank.
    3. Niepmann, Friederike & Schmidt-Eisenlohr, Tim, 2023. "Institutional investors, the dollar, and U.S. credit conditions," Journal of Financial Economics, Elsevier, vol. 147(1), pages 198-220.
    4. Ly Dai Hung, 2021. "External Debts and Economic Growth when Debt Rating Matters," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 12(03), pages 1-26, October.
    5. Ostry, D. A., 2023. "Tails of Foreign Exchange-at-Risk (FEaR)," Cambridge Working Papers in Economics 2343, Faculty of Economics, University of Cambridge.
    6. Ly Dai Hung, 2021. "Economic Growth with Public and Foreign Investment in Vietnam," Working Papers hal-03241846, HAL.
    7. Ly Dai Hung, 2020. "A Macro-Finance Model of Government Bonds Yields in Vietnam," Working Papers hal-03133807, HAL.
    8. Leonardo Villar-Gómez & Javier Gómez & Andrés Murcia Pabón & Wilmar Cabrera & Hernando Vargas, 2023. "The monetary and macroprudential policy framework in Colombia in the last 30 years: lessons learnt and challenges for the future," BIS Papers chapters, in: Bank for International Settlements (ed.), Central banking in the Americas: Lessons from two decades, volume 127, pages 87-112, Bank for International Settlements.
    9. Denis Gorea & Oleksiy Kryvtsov & Tamon Takamura, 2016. "Leaning Within a Flexible Inflation-Targeting Framework: Review of Costs and Benefits," Discussion Papers 16-17, Bank of Canada.
    10. Karen K. Lewis, 2011. "Global Asset Pricing," Annual Review of Financial Economics, Annual Reviews, vol. 3(1), pages 435-466, December.
    11. Molestina Vivar, Luis & Wedow, Michael & Weistroffer, Christian, 2023. "Burned by leverage? Flows and fragility in bond mutual funds," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 354-380.
    12. Mika Nieminen, 2017. "Patterns of international capital flows and their implications for developing countries," WIDER Working Paper Series wp-2017-171, World Institute for Development Economic Research (UNU-WIDER).
    13. Lee, Seung Jung & Liu, Lucy Qian & Stebunovs, Viktors, 2022. "Risk-taking spillovers of U.S. monetary policy in the global market for U.S. dollar corporate loans," Journal of Banking & Finance, Elsevier, vol. 138(C).
    14. Prabheesh, K.P. & Anglingkusumo, Reza & Juhro, Solikin M., 2021. "The dynamics of global financial cycle and domestic economic cycles: Evidence from India and Indonesia," Economic Modelling, Elsevier, vol. 94(C), pages 831-842.
    15. Valentina Bruno & Hyun Song Shin, 2017. "Global Dollar Credit and Carry Trades: A Firm-Level Analysis," The Review of Financial Studies, Society for Financial Studies, vol. 30(3), pages 703-749.
    16. Ulf Söderström & Alexis Stenfors, 1995. "Explaining devaluation expectations in the EMS," Finnish Economic Papers, Finnish Economic Association, vol. 8(2), pages 63-81, Autumn.
    17. Norring, Anni, 2022. "Taming the tides of capital: Review of capital controls and macroprudential policy in emerging economies," BoF Economics Review 1/2022, Bank of Finland.
    18. Manopimoke, Pym & Nookhwun, Nuwat & Pattararangrong, Jettawat, 2024. "Exchange rate in emerging markets: Shock absorber or source of shock?," Journal of International Money and Finance, Elsevier, vol. 148(C).
    19. Eugenio Cerutti & Stijn Claessens & Andrew K. Rose, 2019. "How Important is the Global Financial Cycle? Evidence from Capital Flows," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(1), pages 24-60, March.
    20. Grintzalis, Ioannis & Lodge, David & Manu, Ana-Simona, 2017. "The implications of global and domestic credit cycles for emerging market economies: measures of finance-adjusted output gaps," Working Paper Series 2034, European Central Bank.

    More about this item

    Keywords

    Exchange Rate Premium; Foreign Exchange Intervention; Forward Contract;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-03126494. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.