Tác động của tỷ giá đến thương mại song phương của việt nam với trung quốc, mỹ và nhật bản nhìn từ góc độ ngành tt tiếng anh

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INTRODUCTION
1. Rationale for research
Vietnam’s fledgling and open economy is currently going through the process of
modernization and industrialization and export is considered one of the key engines of
economic growth for the country. Indeed, Vietnam has accomplished a number of
significantly fruitful achievements with its export-oriented industrialization strategy.
Particularly, the annual average growth rate of GDP remained stable at 7% while the growth
rate of export constantly reached 18% per year over the period 1990-2016. However, the
growth rate of imports was also reported to be greater than 22% in the same period.
Accordingly, Vietnam experienced a trade deficit in most of the period from 1990 to 2016,
although it gained a trade surplus in the recent 2 years – 2017 and 2018 – which was still
modest in value. Many studies have investigated and tried to explain the root causes of
Vietnam's trade deficit and exchange rate is considered one of the important determinants of
the trade balance, along with other macroeconomic variables. Especially, the country has
undergone a period of macroeconomic instability since 2007. Therefore, exchange rate
management policies designed to promote exports and stabilize the macro-economy are
regarded a matter of great concern in the current context of Vietnam. For Vietnam, so far,
there have been very few quantitative studies examining the impacts of exchange rates on
trade at the industrial level. In addition, these studies have not taken into account the
assumption of the asymmetric response of the trade balance to exchange rate movements.
Therefore, this study will examine the impacts of exchange rate movement variability
on Vietnam's trade. Specifically, the main purpose of the research is to explore the relationship
between exchange rates and bilateral trade performance between Vietnam and its major
trading partners including China, the US, and Japan by using industry-level data. These three
countries were exclusively chosen because they have been reported as the three leading
trading partners of Vietnam with a total import-export turnover accounting for up to 40% of
the total import turnover of Vietnam in 2015. According to the General Department of
Customs, the US, Japan, and China are the three largest export markets of Vietnam with a
total export value of over $US10 billion, making up 42.5% the country's total export value.

Meanwhile, the three largest import markets are China, South Korea, and Japan with a total
import value of over $US 10 billion, occupying 55% of Vietnam's total export value.
This study seeks to provide a more comprehensive picture of the effects of exchange
rates on Vietnam's trade balance with its major partners by using disaggregated data to
consider whether the exchange rates are related to the causes of Vietnam’s trade deficit with
China and its surplus with other major trading partners (the USA, Japan). From the thesis's
findings, the author will draw some implications for the exchange-rate policy of Vietnam.
2. Research Objectives
The objectives of the thesis are as follows:
- Investigating the impacts of exchange rates on the trade balance of Vietnam

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- Proposing some recommendations regarding the exchange-rate policy framework to
improve the trade balance of Vietnam
Research questions
What are the impacts of exchange rates on Vietnam's trade balance with China, the
US, and Japan as a whole?
What are the impacts of exchange rates on Vietnam's trade balance with China, the
US, and Japan for each commodity group?
Is the theory of the J-curve effect supported in Vietnam's trade relationship with its
major partners?
Do exchange rates have asymmetric effects on Vietnam's trade balance?
3. Subjects and Scope of the thesis
- Research subjects: Vietnam's trade balance with the three partners, bilateral exchange
rates, Vietnam's import and export performance in each industry or for each commodity group
- Research scope: The study mainly uses data in the period 2007-2018 for the 21
industries in which trade between Vietnam and the three partners took place. In addition, due
to the limited access to unofficial trade data, the models used to examine the relationship
between exchange rates and trade balance for Vietnam and China will ignore the issues related

to cross-border trade.
4. Research methods
The study employs both qualitative and quantitative research methods. Regarding the
quantitative method, this study uses the statistical analysis method, an autoregressive
distribution lag (ARDL) model and a nonlinear autoregressive distribution lag (NARDL)
model to estimate the impacts of exchange rates on trade balance in both the long run and the
short run.
5. New contributions of the doctoral thesis
New contributions to existing academic literature and theories
Firstly, an overview of previous empirical studies has shown that the use of either
aggregate trade data or disaggregate trade data at the bilateral level may suffer from the
aggregation bias problem as exchange rates may exert significant impacts on some particular
industries or commodities. It might not bring about any/or just less robust effects, sometimes
even resulting in undesirable outcomes, to some other commodities or industries. Hence,
using aggregate trade data may lead to mixed results, depending on which commodity groups
are given the dominant positions. In the case of Vietnam, there is a limited number of studies
employing disaggregate data for modelling at the industrial level.
Secondly, a prevalent assumption usually adopted in previous studies is that exchange
rates will exert symmetrical impacts on the trade balance (i.e. the reactions of trade balance
to changes in exchange rates in the case of currency depreciation would be the same as that
of currency appreciation). Recently, there are some arguments claiming that commercial
producers and traders may respond differently to currency depreciation and appreciation, or,


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exchange rates may have asymmetrical impacts on trade balance. To date, there has been no
research using an asymmetric non-linear model to examine asymmetric impacts of exchange
rate on Vietnam's trade balance.

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CHAPTER 1. THEORETICAL ISSUES ON EXCHANGE RATES AND THE

RELATIONSHIP BETWEEN EXCHANGE RATES AND TRADE BALANCE

Recommendations based on the study findings

1.1. Definition of exchange rates and trade balance

This study employs a set of autoregressive distribution lag (ARDL) and non-linear
ARDL (NARDL) models to examine the relationship between exchange rates and the trade
balance of Vietnam with its biggest trading partners including the United States of America,
Japan and China for 21 key commodity groups classified by the Harmonized System (HS). In
this study, the data is collected from many credible sources from January 2008 to December
2017. The empirical results have revealed some issues as follows:

1.1.1. Exchange rates

Firstly, the estimation results of the ARDL and NARDL models reported a degree of
bias to the regression estimates when using aggregate data and the asymmetric approach.
Secondly, the impacts of exchange rates on trade balance have differed across trading
partners. A depreciation will tend to improve Vietnam's trade balance with Japan while
worsening Vietnam's trade balance with the US. Meanwhile, the trade balance between
Vietnam and China appears to be insensitive to real bilateral exchange rates. In conclusion,
the use of exchange rates as a tool to improve the trade balance of Vietnam should be
considered with great caution and take into account different priority targets as well as the
coordination between different policies. More importantly, in the context of a developing
country as Vietnam the manufacturing sector depends heavily on imported intermediate
products and the import replacement capacity is relatively weak, a depreciation may lead to

undesirable effects of exchange rates on trade balance.
6. Contents of the thesis
There are five chapters in this study as follows:
Chapter 1: Theoretical issues on exchange rates and the relationship between exchange rates
and trade balance
Chapter 2: Literature review and theoretical framework for analysis
Chapter 3: The practice of exchange rates and trade relations between Vietnam and the three
partners
Chapter 4: Results and discussion
Chapter 5: Conclusion and policy recommendations

1.1.2. Trade balance
1.2. The theoretical relationship between exchange rates and trade balance
1.2.1. Relationship between exchange rates and trade balance in the standard theory of
international trade
Standard Trade Theory demonstrates the relationship between real exchange rates and
trade balance following a simple common-sense approach. A depreciation of domestic
currency will lead to a decrease in the consumption of imported goods of home country's
households. At the same time, foreign households tend to purchase relatively more domestic
goods. Ultimately, the higher the real exchange rate for the home country is, the more the
trade surplus the country obtains (Wei-Bin, 2013).
1.2.2. Relationship between exchange rates and trade balance: The Elasticities Approach
1.2.2.1. Bickerdike-Robinson-Metzler condition
The essence of the elasticities approach is to investigate the substitution effects derived
from a change in relative prices caused by currency devaluation on consumption and
production . Trade balance adjustment path is examined on the basis of the price elasticities
of demand for imports and exports in demand functions. Bickerdike (1920), Robinson (1947),
Metzler (1948) were the first authors who developed and build this approach by modeling
nominal import and export prices as functions of import and export quantities, and provided
BRM conditions. The BRM condition implies that the effect of exchange rate movements on

trade balance depends on import and export supply, demand elasticity, and the initial volume
of trade. The sufficient condition for trade balance improvement is provided by the BRM
condition as follows:
∗

∗
∗

∗
∗

∗

> 0 (1.9)

Where and denote the price elasticities (in absolute values) of domestic demand for
imports and supply of exports. Analogously, ∗ and ∗ denote the respective foreign price
elasticities.
1.2.2.2. Marshall-Lener condition
Marshall-Lerner condition was derived from the BRM condition (Marshall, 1923;
Lerner, 1944). This condition (referred to here as the ML condition) comes from letting ε→∞
and ε^*→∞. In other words, it is implied that if domestic and foreign supply elasticities are
strictly elastic and if income remains constant, the left side of the condition (2.9) will become
θ+θ*-1. Thus, the trade balance will improve after a depreciation if θ+θ*>1 holds. Or, in the
standard presentation of the ML condition, a depreciation will lead to s an improvement of


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the trade balance when the domestic plus the foreign import demand elasticities for imports,

in absolute value, exceeds one.

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1.2.2.3. J curve effect

Houthakker and Magee (1969) proposed a reduced-form equation for the import and export
demand functions that has since become the basis for studies on the relationship between
exchange rates and trade balance employing the ML condition.

The theory of the J-curve effect suggests that the depreciation of the domestic currency
will improve the trade balance in the long run. However, the trade balance will deteriorate in
the short-run, and trade balance movement, if graphically represented, will look like the letter
J.

More recently, empirical studies associated with the ML condition have used the
cointegration technique in analysis of exchange rate impacts on trade balance, such as those
of Andersen (1993), Rose (1991), Johansen and Juselius (1990), Bahmani-Oskooee and
Niroomand (1998), Upadhyaya et al (1999), Kemal and Qadir (2005)…

1.2.3. The relationship between exchange rates and trade balance: the absorption approach

Other studies using single equation methods (including the ARDL model) based on
the cointegration technique also give more detailed estimation results to consider the ML
condition.

The absorption approach proposed by authors such as Harberger (1950), Meade
(1951), and Alexander (1952) is a combination of the elasticities approach and Keynesian
macroeconomic school of thought. The core assumption of this approach is that any
improvement in trade balance would require an increase in income over total domestic

expenditures (Malimi, 2013). This approach indicates that a devaluation of the domestic
currency will bring about the improvement of trade balance if the substitution effect of relative
price changes boosts output more than absorption.
1.2.4. Relationship between exchange rates and trade balance by monetary approach
The monetary approach assumes that the balance of payments should be considered
from the perspective of money supply and demand. Accordingly, the devaluation of the
currency leads to an increase in the prices of traded goods and services. People will then
reduce their spending relative to income in order to restore the real value of their holdings of
money. In brief, a reduction in consumption will ultimately result in a decline in absorption
and the improvement of trade balance
In general, the three theoretical approaches are complementary for each other rather
than being contradictory, and each approach has its own advantages and disadvantages.
According to Cooper (1971), these three approaches can be considered in a temporal
sequence. The elasticities approach is regarded as a short-term approach; the absorption
approach is applicable to medium-term analyses, and the monetary approach can be used in
the case of long-term analysis.
CHAPTER 2. OVERVIEW OF EMPIRICAL STUDIES ON RELATIONSHIP

BETWEEN EXCHANGE RATES AND TRADE BALANCE AND RESEARCH
METHODOLOGY
2.1. Overview of international studies on the relationship between exchange rates and
trade balance
2.1.1. Studies on the elasticities approach
2.1.1.1. Studies employing the ML condition
a) Studies employing aggregate trade data
Early studies on trade elasticities to exchange rates paid little attention to exchange
rates, but rather focused on export and import price indicators to examine the "substitution
effects". Recent studies have used relative price elasticities to test the ML condition.

Some other studies estimated a single elasticity (export or import elasticity) if the

elasticity value is greater than 1,the ML condition is then satisfied.
In addition, some studies focused on trade balance as the variable of interests rather
than looking at exports and imports separately to test the ML condition.
b) Studies employing bilateral data
A considerable number of empirical studies investigated the impact of exchange rates
on trade balance at the bilateral level based on the ML condition such as Marquez (1990),
Shirvani and Wilbratte (1997), Bahmani-Oskooee and Goswami (2004), Sek and Har (2014),
Arunachalaramanan and Ramesh (2011), and Memarian and Shanei (2016) ... etc.
2.1.1.2. Studies testing the J-curve effect
Studies using the aggregate approach that supported the existence of the J-curve effect
include Bahmani-Oskooee (1985), Rosensweig and Koch (1988), Himarios (1989)…etc.
Meanwhile, the J-curve effect was not accepted by research of Felrningham (1988),
Demirden and Pastine (1995), Felmingham and Divisekera (1986).
2.1.1.3. Studies employing industry/commodity trade data
Recent studies examining the impacts of exchange rates on trade balance have
employed disaggregated trade data for individual industries. These studies suggest that the
use of aggregate or bilateral trade data can cause bias problems when a number of significant
exchange rate impacts could be offsetted by a number of insignificant effects and vice versa
(Baek, 2013). See, for example, Bahmani-Oskooee and Ardalani (2006), Baek (2013), Baek
(2014), Huchet-Bourdon et al (2012) ... etc.
2.1.2. Studies adopting thef monetary approach
The literature review shows that there are relatively few empirical studies adopting
these two approaches. This may be due to the fact that both of the two approaches have not
been developed to cope with changes in the nature of the current account balance in the postBretton Woods period. Therefore, the two approaches are still quite primitive and
underdeveloped (Abbas Ali et al., 2014). In regard to these different views, recent studies
have developed an alternative reduced form model which incorporates the three approaches.


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2.1.3. New studies on the nonlinear relationship or asymmetric reaction of trade balance
to exchange rate movements

predicted to be positive. REX is seen to rise when the VND depreciates, thus d should be
positive.

A number of recent studies state that the effects of exchange rate changes on trade
balance are asymmetric based on some emerging theories ssuch as the hysteresis behavior,
the price stickiness, or the pricing-to-market behavior. Several studies chose to employ the
asymmetric approach in the recent three years such as Bahmani-Oskooee and Fariditavana
(2015), Bahmani-Oskooee and Fariditavana (2016), Shin et al. (2014).

2.2.3. The Econometric Procedures

2.2. Empirical studies in Vietnam and research gaps
2.2.1. Empirical research in Vietnam

2.2.3.1. The ARDL model
The equation (9) is applied to estimate only long-run coefficients. To estimate shortrun impacts of the variables on trade balance, especially the short-run impacts of exchange
rates (to consider the J-curve effect), following Pesaran et all (2001), the equation (9) will be
rewritten in the form of an error correction model as follows:
∆

!

= - + ∑203 /!

0 ∆ln

! 0

+ ∑2034 1!

0

∆ 5!"#0 + ∑203 6!

5!780 +

0∆

The employment of quantitative models to study the role and impacts of exchange rates
on trade in Vietnam is increasingly drawing attention from Vietnamese academics. A series
of recent papers by Pham (2012), Pham and Nguyen (2013), Hoang (2013), Vu (2013), Phan
and Jeong (2015), Mai (2016), Nguyen Cam Nhung và Tran Thi Thanh Huyen (2019),
Nguyen và cộng sự (2018), Hoang (2016)...etc show different impacts of exchange rates on
the trade balance of Vietnam by employing various approaches.

Pesaran, Shin, and Smith (2001) recommended a standard F-test for the
hypotheses: I4 : 91 =92 =93 =94 =0. If the F-statistic is statistically significant, the null
hypothesis I4 will be rejected or in other words, there does exist cointegration among
variables.

2.2.2. Research gaps

2.3.3.2. The NARDL model

The research gap related to the topic of the relationship between exchange rates and

trade balance in Vietnam associates with two main issues: (i) Firstly, there are very few
studies examining the effects of exchange rates on trade balance using disaggregated trade
data for individual industries; (ii) Secondly, no studies have considered the possibility and
assumed that the effect of exchange rates on trade balance could be asymmetric.

In order to test the hypothesis of an asymmetric reaction to exchange rate changes,
studies of Bahmani-Oskooee and Fariditavana (2016) or Arize, Malindretos, and Igwe (2017)
have included new variables to describe the movements of the variable LNREX which
originally denotes logarithm of real bilateral exchange rate. Of which, the variable NEG
specifies the decrease of the exchange rate. In this study, it denotes the appreciation of the
VND, and the variable POS signifies the increase of the exchange rate or the depreciation of
the VND. Specifically, POS and NEG are defined as follows:

2.3. Research methodology
2.3.1. Autoregressive distribution lag model (ARDL) and bound test

∑2034 1!

0

∆ '()!

0

2.3.1.1. An introduction to the autoregressive distribution lag model (ARDL) and bound test

+ 9 ln

2.3.1.3. Requirements for the application and advantages of the ARDL Approach
2.3.2. The regression model

ln

=

+

"#
!

+$

%!
!

+ & '()! +

!

(9)

Of which *+! represents the value of imports to Vietnam from its partners (Japan,
China, US) for the commodity group/industry i, )+! represents the value of exports from
Vietnam to its partners (Japan, China, US) for the commodity group/industry I.
"#
%!
! (
! ) is the real income of Vietnam (its partner) which are measured by the
industrial production index, '()! is the bilateral real exchange rate between Vietnam Dong
(VND) and the foreign currency. Accordingly, b is expected to be negative while c is

!

!

N3

N3

!

!

N3

N3

+ μ:

JKL! = M ∆ '()N = M max ∆ '()N , 0

2.3.1.2. The steps of the ARDL Cointegration Approach

Based on the work conducted by Bahmani-Oskooee and Baek (2016), we built a model
to research the relationship between exchange rates and the trade balance of Vietnam with its
three partners by commodity group/industry. The model is illustrated as follows:

+ φ< lnY:>? + φ@ lnY:AB + φC lnREX :

:

(S! = M ∆ '()N = M min ∆ '()N , 0
Shin, Yu, and Greenwood-Nimmo (2014) suggested to replace the variable lnREX in
the error correction model (9) by the two new variables POS and NEG. Thus, the equation (9)
will be rewritten and named NARDL or the non-linear autoregressive distributed lag model.
∆
∑2034 W!
φC POS:

!

= - + ∑203 /!
0

∆JKL!

0

0 ∆ln

+ ∑2034 X!

+ φa NEG:

+ μ:

! 0
0∆

(11)

+ ∑2034 1!

(S!

0

0

+ 9 ln

"#
! 0

∆
:

+ ∑2034 6!

0∆

UV
! 0
\]

+ φ< lnIND>?
+ φ@ lnIND:
:

+

+


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The authors proved that the bounds F-test employed in the ARDL model might be used
in the NARDL model in a similar way. If the estimation coefficients φC and φa have the same
signs and equal in magnitude, it means exchange rates have symmetrical impacts on trade
balance in the long run.
2.3.3.3. Steps for estimating the models
2.3.4. Data sources
In this study, the monthly trade data over the period 2005M1-2017M12 are drawn from
the International Trade Centre. Based on the one-digit Harmonized System, trade data is
divided into 21 industries/commodities.
Data on real income (proxied by the industrial production index), price level and
exchange rates are collected from the International Financial Statistics database of the
International Monetary Fund. Real exchange rate is defined as follow:
J
'() = ∗ × ('
J
In which NER is the nominal exchange rate between VND and JPY, P (J
level of Vietnam (the partners).

∗

is the price

(99 chapters - or 99 commodity groups). As a result, five export commodities are selected as

follows:
Articles of chapter 85 (including electrical machinery and equipment and parts thereof;
sound recorders and reproducers, television image and sound recorders and reproducers, and
parts and accessories of such articles) of the HS table code is denoted HS85. The export
turnover of phones and components carried 80% of total export turnover of the articles of
HS85 in 2017.
Articles of chapter 84 of the HS table (Including nuclear reactors, boilers, machinery
and mechanical appliances; parts thereof) is denoted HS84. The export turnover of computer
and components carried 70% of total export turnover of HS84 in 2017.
The textile products (HS61) accounting for 10.2% of Vietnam's exports are goods of
chapter 61 and 62 in the HS code table. The footwear products (HS64) are goods of chapter
64. Exports of these articles ranked third in Vietnam's key export products.
Articles of chapter 03 (HS03) include fish and crustaceans, molluscs and other aquatic
invertebrates. The export value of these commodities reached over 6,9 billion USD in 2017.
3.3. The general trade performance between Vietnam with each of the three trading
partners
3.3.1. Bilateral trade between Vietnam and China

CHAPTER 3. THE PRACTICE OF BILATERAL TRADE AND EXCHANGE RATES

BETWEEN VIETNAM AND CHINA, JAPAN AND THE US
3.1. VND exchange rate and exchange rate policies of Vietnam
3.2. Vietnam’s export and import performance
3.2.1. Summary of Vietnam export and import records
Vietnam has accomplished certain achievements in export activities and improved the
trade balance in recent decades. In the period of 1990-2017, total import-export turnover
increased by 82 times. In particular, export value increased 89 times with an average annual
growth of 17.4%, import value rose 76 times with an average annual growth of 16.7%.
However, Vietnam still ran a trade deficit from 1990 to 2015. In the last two years, the country
has managed to post a modest trade surplus

Regarding the structure of import and export goods, Vietnam also experienced positive
changes. The country’s commodity export has been moving away from raw and semiprocessed goods to processed and higher-tech products. However, enterprises with foreign
direct investment (FDI) are dominating the export sector, and trade surplus is mainly
contributed by FDI enterprises, while domestic enterprises are suffering deficit.
3.2.2. Vietnam's major import-export markets and key export products
In this section, the study presents the situation of the import and export of key export
commodities of Vietnam and their major markets. Key export commodities will be identified
based on the data collected by UN Comtrade in 2017 and the 2-digit HS harmonization system

3.3.3.1. Trend of merchandise trade between Vietnam and China
In the last decade, China has risen and become the largest trading partner of Vietnam.
Export and import turnover both increased sharply in the period from 1990 up to now.
However, it can be seen that import is growing faster than export, so the trade balance between
Vietnam and China has always been in deficit for many years.
3.3.1.2. Structure of Vietnam's exports to China
The structure of Vietnam's exports to the Chinese market has experienced positive
changes. Currently, technology-intensive manufacturing products are occupying a bigger
share than the others and have been growing dramatically in the market.
3.3.1.3. Structure of imported goods from China
The structure of Vietnam's imports from China has changed in the last 10 years, but
the change is not as significant as that of exports.
3.3.2. Bilateral trade between Vietnam and Japan
3.3.2.1. Trend of recent bilateral trade between Vietnam and Japan
Bilateral trade between Vietnam and Japan accounts for about 10% of Vietnam's trade
value. As of 2017, Japan is the fourth largest partner of Vietnam. From 2009 to 2017,
Vietnam's exports to this market increased by 160%, while imports increased equally at
approximately 140%. Regarding the trade balance of the two countries, between 1995 and
2017, Vietnam achieved trade surplus for most of the period, except for 2009-2010 and the
most recent three years 2015-2017. During these three years, imports have outpaced exports,
causing a trade deficit in Vietnam’s bilateral trade relations with Japan.

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3.3.2.2. Structure of goods exported to Japan.
In 2007-2008, Vietnam's exports to Japan largely involved fuel and agricultural
products which is similar to its trade with China. There is a minor change in the export
structure over the 10-year period from 2008 to 2018. Japan is also a potential market for some
other agricultural products such as cashew, tea, handicrafts ... if the exported goods meet the
standards of food hygiene, safety and quarantine.
3.3.2.3. Structure of imported goods from Japan
There has been a little change in the structure of Vietnam's imports from Japan from
2007-2008 to 2007-2017. The most important import items still include machinery, spare
parts, steel, computers and components, cars…etc.
3.3.3. Bilateral trade between Vietnam and US
3.3.3.1. Trend of merchandise trade between Vietnam and US
Trade and investment relations of the two countries were strengthened after the two
countries normalized their relations in October 1995. Vietnam's export to this market has
increased by more than 6 times, while import has increased by 3 times. However, during this
period, trade between the two countries was found to grow below its potential.
A bilateral trade agreement between the two countries was signed in 2011. This
agreement provides the needed foundation for addressing bilateral issues. As a result, the US
has become Vietnam's second-largest export partner since 2003. Vietnam's exports to the US
reached 41.6 billion USD, increasing39 times from 2001 to 2017, while imports grew slower
with 9.2 USD billion, up 22 times. Accordingly, the trade surplus has increased from 654
million USD to 32.4 billion USD in the period.
3.3.3.2. Structure of export goods
In 2007-2008, the top Vietnamese export products to the US with a trade value of over
1 billion USD are textiles (5 USD billion), footwear (1,075 USD billion) and wood and wood
products (1,063 USD billion).

There are six products with an export value of over 2 billion USD in 2017-2018
including textiles, paper, food wear, phones and components, computers and components,
wood and wood products, machinery and other spare tools. These 6 commodity groups
accounted for 74% of Vietnam's total exports to the US in 2018.
3.3.3.3. Structure of import goods
3.4. Real bilateral exchange rate and trade balance of Vietnam with the three trading
partners
3.4.1. USD/VND exchange rate and trade balance between Vietnam and the US
The real exchange rate (USD/VND) and the nominal exchange rate have been moving
in opposite directions over more than a decade. The real exchange rate line was above the
nominal exchange rate line before 2011. After that, the nominal exchange rate line overcame
the real exchange rate line and this gap has been widened. Between January 2005 and January
2017, the nominal exchange rate consistently decreased by an average of 2.8% per month.

12

Bui et al. (2017) show that the Vietnamese currency is being overvalued. The main
reason is that the monetary policy of the anchor currency is not developed and implemented
based on the basic principles of macroeconomics.
However, trade balance increased in the same direction as the nominal exchange rate,
but in the opposite direction with the real exchange rate. This shows that the real exchange
rate and Vietnam's trade balance with the US are less likely to experience a theoretically
strong relationship.
Therefore, we can come up with a conclusion similar to the work of Phan Thanh Thanh
(2018), that is, Vietnam's trade balance is not affected by nominal factors but is determined
by real and structural factors. Specifically, domestic production and export structure largely
depend on imported inputs as there is a serious lack of supporting industries in Vietnam, not
to mention that these industries have suffered from pro-long underdevelopment .
3.4.2. CNY/VND exchange rate and trade balance with China
The nominal exchange rate of CNY/VND increased continuously over the period

2000-2013. The nominal exchange rate of CNY/VND depreciates by 80% from January 2005
to December 2017. Meanwhile, the real exchange rate increased by 8.3%. The trade balance
of the two countries during this period was quite unstable. It seems to bring a similar
conclusion like the case of the US, that is, Vietnam's trade balance is less affected by nominal
factors or real exchange rates.
3.4.3. The rate of JPN/VND and the Japanese trade balance
The figures show that nominal exchange rate depreciated about 31% in the period
2005-2017, and the real exchange rate appreciated by about 50%. The strengthening of the
JPY since the end of 2015 has partly explained the slowdown of Vietnam's exports to this
market and caused Vietnam's trade deficit to this market in 2016 and 2017.
CHAPTER 4. ESTIMATION RESULTS AND DISCUSSIONS

4.1. Estimation results of the models of 21 commodities
This section demonstrated the estimation results of 21 models for 21 commodity
groups classified by the Harmonized Systems. The data of some commodities is not available,
so their models cannot be performed.
4.1.1. Diagnostic tests for the ARDL and NARDL models
The results of stationary, cointegration, and other diagnostic tests are presented as
follows:
-

-

The results of the unit root test showed that most of the independent variables are
stationary of order zero or order one according to the ADF standard with a 1%
significant level and the PP standard with a 5% significant level
The results of Lagrange multiplier (LM) statistics show that the null hypothesis
cannot be rejected at the 10% level in all cases, indicating that there is no serious
problem of serial correlation in our models.

13

-

The results also confirmed that there is no existence of autocorrelation or
heteroscedasticity in the models and the models are correctly specified. The
CUSUM and CUSUMSQ tests showed the constancy of the coefficients in most
models.

4.1.2. Estimation results of long-run coefficients
4.1.2.1. Results for China
The results show that there are 5 commodities (accounting for 18% of total import
value and 9% export value for China's market) where real exchange rate coefficients are
significant at 5% or 10% level. Most of the coefficients have positive sign, meaning thata
depreciation will positively affect the trade balance of these commodities.
The coefficient of the real exchange rate variable in the aggregate model of China is
not statistically significant, implying that exchange rate does not affect the total trade balance
between Vietnam and China in the long run. An important assumption adopted in the ARDL
model is that all independent variables will exert symmetrical impacts on the trade balance.
Therefore, the conclusions regarding the movements of the trade balance will be reversed in
the case of VND appreciation.
4.1.2.2. Results for the US

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For Japanese, there are 11 commodities that have at least one statistically significant
short-term coefficient (accounting for 42% of and 48% of exports of Vietnam in this market
in 2017).
4.1.3.2. The J curve effect

According to the results of the models of China, the J-curve effect is found in mineral
products (SC05) and raw hides and skins...(SC08)
For the US, the J-curve effect is spotted in products of chemical or allied industries
(SC06)
For Japan, the J-curve effect is found in mineral products (SC05)
In general, the trade balance between Vietnam with China, Japan, the US are less
sensitive to exchange rate movements. However, looking at the three models that measure the
impacts of exchange rates on Vietnam’s total trade balance (aggregate models) with the three
trading partners, it is possible to conclude that exchange rate is not sensitive to trade balance.
The results justified the conclusion of Baek (2013), saying that the use of aggregate data will
cause bias in the estimates of the coefficients. Apparently, it is not reasonable to conclude
how differently exchange rate affects the trade balance with different partners and how it
affects different commodity groups/industries just by looking at the results of the aggregate
model.

There are 7 product categories (accounting for about 59% of Vietnam's import value,
and 52% of Vietnam's export value to the US market) where the balance trade is affected by
exchange rates. However, the estimation results of the long-run coefficient in the aggregate
model indicate that trade balance is not sensitive to exchange rate movements.

For the income variable, all three partners have share one thing in common, that is, the
trade balance is more sensitive to Vietnam's income than the income of the partners. Most of
Vietnam's income coefficients are found positive.

4.1.2.3. Results for Japan

4.1.4. Estimation results of long-run coefficients in the NARDL models

The estimation results of the long-run coefficients included in the models showed that
there are only 7 commodity groups/industries (accounting for 28% of imports and 34% of

exports of Vietnam for this market) which are affected by exchange rate. The income
coefficient of Vietnam suggested there are 7 commodity groups/industries (making up 32%
of imports and 31% of exports in the Japanese market) which have statistically significant
estimation results. The coefficient of the variable denoting exchange rate in the aggregate
model (Sctotal) of Japan is not statistically significant, implying that exchange rate does not
affect the total trade balance between Vietnam and Japan.

4.1.4.1. Results for China

4.1.3. Estimation results of short-run coefficients of the ARDL models
4.1.3.1. Results of short-run coefficients
For China, there are 9 commodities that have at least one statistically significant shortrun coefficient. These groups make up 54% of imports and 56% of exports of Vietnam in this
market in 2017.
For the US, there are 8 commodities that have at least one statistically significant shortrun coefficient, (accounting for 68% of imports and 54% of exports of Vietnam in this market
in 2017).

Results of the NARDL models pointed out that NEG and POS are statistically
significant in 8 models of commodities. Of which, 5 commodities have been specified already
by the ARDL models and 3 other commodities that have been discovered by the NARDL
models. This finding is consistent with many previous studies, highlighting the problem of
bias that distressed previous works when assuming that the impacts of exchange rate on trade
balance are always symmetrical (Bahmani-Oskooee and Baek, 2016; Arize et al., 2017).
Clearly, without the adoption of the non-linear regression model (NARDL), these commodity
groups/industries might be mistaken that their real exchange rate coefficients were not
statistically significant. Or in other words, their trade balance did not respond to the change
of exchange rate.
4.1.4.2. Results for the US
Similar to the conclusion of the models of China, in the NARDL model, trade balance
is found to be more sensitive to exchange rate movements than in the ARDL model. There
are 11 commodities where trade balance is sensitive to exchange rate changes. These

commodities make up 71% of imports and 81% of exports of Vietnam for this market. In


15

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addition, these results also indicate the asymmetric responses of trade balance to exchange
rate movements.

the US. For Japan, the J-curve effect is found in some commodities, including SC04, SC05,
SC21.

Regarding the aggregate model, the estimated coefficients of SCtotal indicate that, in
the long run, the depreciation of VND would not exert a positive impact on the trade balance
of Vietnam with the US. In fact, the estimation results show that when the VND depreciated
by 1%, the trade balance with the US would worsen by 2.5%. In addition, there is no
significant impact on trade balance if the VND is appreciated (estimated coefficients turn out
statistically insignificant).

Regarding the aggregate model (Sctotal), J-curve effect is spotted in the trade balance
between Vietnam and Japan.

4.1.4.3. Results for Japan
Results of the NARDL models pointed out that there are 15 commodity groups
(accounting for 46% of imports and 63% of exports between Vietnam and Japan) where their
trade balances are sensitive to exchange rate changes. Of which, there are 6 commodities that
were specified by the ARDL models, and the NARDL models listed out 9 more commodities.
Concerning the aggregate model, the results indicated that exchange rate does affect
the trade balance between Vietnam and US in the case of VND depreciation. If the VND

depreciates by 1%, Vietnam’s trade balance with Japan will improve by 1.2%. In case of VND
appreciation, the trade balance will not be affected.

In general, there is a lack of a support for a J curve in the relationship between
exchange rate and the trade balance of Vietnam with the three trading partners.
4.2. Results from the NARDL models for 5 key export products
The results of the ARDL and NARDL models have shown and proved that in the case
of Vietnam, the assumption about the symmetric reaction of the trade balance to exchange
rate changes also causes a bias in the results. Therefore, in this section, the author examines
the impact of exchange rates on the trade balance of Vietnam's key export products based on
the NARDL model.
4.2.1. Long-term coefficient results

4.1.5. Estimation results of short-run coefficients in the NARDL models

The results of the ARDL and NARDL models have shown and proved that the
assumption about the symmetric reaction of the trade balance with the exchange rate changes
also causes a bias in the results in the case of Vietnam. Therefore, in this section, the author
examines the impact of exchange rates on the trade balance of Vietnam's key export products
based on the NARDL model.

4.1.5.1. Results for China

4.2.1.1. Electric equipment, machinery, components and components (HS85)

The results show that there are 11 commodities where the estimated coefficients of
POS (specifying the increase of the exchange rate or the depreciation) and NEG
(specifying the decrease of the exchange rate or the appreciation) are statistically significant.
The sign and magnitude of estimated coefficients vary across commodity groups.
The results of the short-term coefficients of POS and NEG also indicate the

asymmetric effect of exchange rate on trade balance. Similar to the results of the long-term
coefficient, trade balance in the NARDL model is more sensitive to exchange rate movements
than in the ARDL model.

The HS85 model results show that the trade balance of this commodity group is not
affected in the case of Vietnam-US and Vietnam-China when the VND depreciated.
Regarding Vietnam-Japan trade, the trade balance of this commodity group decreases by 0.7%
when the VND depreciates by 1%. In the case of VND appreciation, only the Vietnam-China
trade balance is affected, and the trade balance of this commodity group will decrease by 6%
when the VND appreciates by 1%. Thus, the devaluation of the domestic currency obviously
does not improve the trade balance of Vietnam with the three partners. The situation is even
worse for the Vietnam-Japan trade balance. Furthermore, the non-linear approach reveals that,
in most cases, exchange rate changes have asymmetric effects on the trade balance.

4.1.5.3. Results for Japan

4.2.1.2. Machinery, mechanical equipment, nuclear reactors, boilers; parts thereof (HS84)

The results of the Wald test statistic indicate that we can reject the null hypothesis of
symmetry in the short run for 11 commodity groups. Of which, there are 9 commodities that
are sensitive to exchange rate when the VND depreciates. Meanwhile, the trade balances of
12 commodities are sensitive to exchange rate when the VND appreciates.
Overall, it is apparent that using the NARDL model can detect more commodity
groups/industries that respond to exchange rate than using the ARDL model.

The results indicate that a VND depreciation does not have an effect on the trade
balance between Vietnam and China for this commodity group. Meanwhile, a VND
depreciation of 1% will lead to a decrease of 8% in the Vietnam-US trade balance, and an
increase of 1.79% in the Vietnam-Japan trade balance. These commodities are mainly
exported by FDI enterprises and deeply involved in global value chains. Therefore, they are

less likely to be affected by exchange rates.

4.1.5.4. The J Curve effect

4.2.1.3. Footwear (HS64)

For China, the J-curve effect is only found in industry SC08. The J curve effect is not
supported by the relationship between exchange rate and the trade balance of Vietnam with

The results show that when the VND depreciates by 1%, the Vietnam-China trade
balance of footwear products is not affected, while the Vietnam-US trade balance deteriorates
by 4%, but the Vietnam-Japan trade balance improves by 1.75%. The production of this

4.1.5.2. Results for US


17

commodity group depends on the imports of raw materials, especially those from the Chinese
market. Therefore, the exchange rate movements did not have much effect on the trade
balance of this commodity group.
4.2.1.3. Textile products (HS61)
The results show that when the VND depreciates by 1%, the trade balance of textile
products in the case of the Vietnam-US and Vietnam-China improve by 4.9% and 19%
respectively. Meanwhile, the Vietnam-Japan trade balance is not affected.
4.2.1.4. Fish and crustaceans, molluscs, and other aquatic invertebrates (HS03)
The results indicate the VND depreciation does not affect the Vietnam-US and ChinaUS trade balance of the HS03, while the Japan-US trade balance decreases by 4.8% in case
the VND depreciates by 1%. In general, it is suggested that the export and trade balance of
this commodity group depend substantially on production capacity and "the capacity to
dominate the market" rather than exchange rates.

4.2.2. Result of short-run coefficients
In the short run, the commodity group of HS85 (electrical goods and electrical
appliances ...) will see its trade balance respond to the depreciation of the VND (POS) in the
case of trade between Vietnam and the US as well as trade between Vietnam and Japan. The
short-run coefficient of POS is not statistically significant in the case of trade between
Vietnam and China. Specifically, the VND depreciation improves the trade balance of textile
and apparel products in the case of trade between Vietnam and the US as well as between
Vietnam and Japan. When the VND appreciates, the trade balance deteriorates significantly
for the Vietnam-US trade, but it improves in case of Vietnam-China trade. Meanwhile, the
Vietnam-Japan trade balance did not respond to the appreciation of VND. The coefficient
results of the commodity group HS84 (machinery, equipment ...) are similar to those of the
HS85.
For the HS64 (footwear), the results of short-run coefficients were similar to those of
the HS85. Specifically, when VND depreciates, the trade balance of this commodity group is
not affected in the case of China-Vietnam trade, improves in the case of Vietnam-Japan trade
and worsen in the case of Vietnam-US trade.
The model results also show that the HS61 (textile products) has better trade balance
in the short-run in the case of Vietnam-US trade if the VND depreciates. It, however, becomes
worse when it comes to Vietnam-China trade and does not show any reaction when trading
with the Japanese counterpart. An VND appreciation will lead to the improvement of the trade
balance in the case of Vietnam-China trade and Vietnam-Japan trade.
The HS03 trade balance is less responsive to exchange rate changes in the short term.
Meanwhile, a VND devaluation causes the Vietnam-Japan trade balance to worsen. AVND
appreciation will improve the Vietnam-China trade balance.
In general, the results of the POS coefficients in the Vietnam-China models indicate
that only the HS61 sees the trade balance respond to exchange rate depreciation in the short

18

run. In contrast, most of the NEG short-run coefficients have at least one coefficient that is

statistically significant and most of them are negative (excepting the HS61). This implies that,
in the short run, a VND depreciation will improve the trade balance of the commodity groups
(HS85, H64, HS84, HS03). Meanwhile, the Vietnam-US trade balance responds to changes
in exchange rate movements for most of the commodities (excepting seafood products). The
Vietnam-Japan trade balance of key export commodities is more sensitive to exchange rates
in the case of VND devaluation (4/5 commodities). There are only 2 commodities where the
Vietnam-Japan trade balances are sensitive to an exchange rate appreciation (HS84 and
HS61).
CHAPTER 5. CONCLUSION AND POLICY RECOMMENDATIONS

5.1. Results
The study uses the linear ARDL and nonlinear ARDL (NARLD) models to examine
the effect of exchange rate changes on Vietnam's trade balance with China, the US, and Japan
employing the disaggregated data of 21 industries (1-digit Harmonized System, HSS) and 5
key export products data (2-digit HS).
In particular, the paper seeks to overcome the shortcomings of previous works in
assessing the relationship between trade balance and exchange rates in Vietnam by: (1) using
industry data to address any limitations raised by the utilization of aggregate data, and (2)
employing a non-linear model to avoid the bias problem of the symmetric assumption.
5.1.1. Conclusions from the estimation results for 21 commodities
Given the estimation results of the short-term and long-term coefficients included in
the models, several conclusions can be drawn as follows:
First, the estimation results of the ARDL and NARDL models for all industries
revealed a degree of bias to the regression estimates when using aggregate data and the
asymmetric approach. Therefore, the author’s approach of using the NARLD model with
industry-level data would provide a more comprehensive and complete picture of the effects
of exchange rate changes on trade balance between Vietnam and Japan.
Second, the theory on the J-curve effect was not supported by the estimation results of
the model examining the relationship between exchange rates and trade balance in the case of
Vietnam-US trade and Vietnam-China trade. Results from models using industry-specific

data implied that only a few industries have experienced the J-curve effect while the models
employing aggregate data did not find any signs of the J-curve effect.
Third, Vietnam’s income had a positive impact on trade balance in the case of
Vietnam-US trade and Vietnam-China trade.
The Vietnam-China trade balance is less sensitive to exchange rate changes than that
of the Vietnam-US trade and Vietnam-Japan trade. This result confirms Vietnam's heavy
dependence on the Chinese import-export market. The exchange rate is the most important
tool in regulating trade policies. he nullification of this tool in trade relations with China
shows that Vietnam has no preventive measures against bilateral exchange rate shocks.


19

For the Vietnam-US trade, the ARDL and NARLD model results show that Vietnam's
trade balance is quite sensitive to exchange rates. The NARDL models indicate that some
commodity groups will see an improvement in trade balance, but others' trade balances will
get worse when the VND depreciates. The aggregate model shows that a VND depreciation
will lead to a decrease in trade balance between Vietnam and the US. Therefore, a currency's
devaluation should not be used as a tool to improve the trade balance of Vietnam in any case.
In addition, the results showed that the Vietnam-Japan trade balance for these
commodities is also sensitive to exchange rate movements (16/19 commodities). The results
of the NARDL models using aggregate data show that areal exchange rate depreciation will
improve trade balance. Meanwhile, trade balance does not respond to an exchange rate
appreciation. Thus, the exchange rate is likely to be an effective tool to improve the VietnamJapan trade balance.
5.1.2. Conclusions from the estimation results for key export products (5 groups of
commodities)
Some conclusions can be drawn from considering the effect of exchange rate changes
on the trade balance of Vietnam's key commodities with its three trading partners as follows:
Firstly, Vietnam's leading export industries are of two types: (i) firstly, hightechnology commodities (HS85 and HS84) which are mainly manufactured by FDI
enterprises and deeply involved in global value chains which has somewhat reduced the

impact of policies with exchange rate tools; (ii) secondly, the commodities that Vietnam has
competitive advantages with cheap labour costs (textile and footwear product)), but these
groups mainly depend on imported raw materials.
Secondly, trade balance seems to be more sensitive to exchange rate depreciation in
the case of Vietnam-US trade and Vietnam-Japan trade and less responsive to exchange rate
depreciation in the case of Vietnam-China trade in both the long run and short run. In case of
VND appreciation, trade balance is more sensitive to exchange rate movements in the case of
Vietnam-China trade (the trade balance of most commodities worsens when the VND
appreciates). Meanwhile, the appreciation of the VND affects only 2 out of 5 commodities in
the case of Vietnam-US trade, and 1 out of 5 commodities in the case of Vietnam-Japan trade.
In general, the use of exchange rates as a tool for improving trade balance is unlikely to be
effective for trade between Vietnam and China.
. 5.1.3. General conclusions
The results have shown that currency devaluation is unlikely to make Vietnam's trade
balance better and even become worse in the case of Vietnam-US trade. For the 5 key export
commodities, trade balance is less sensitive to an exchange rate depreciation. Meanwhile, an
exchange rate appreciation is found to negatively affect the trade balance of most commodity
groups. Based on the theory of trade and the results in chapters 3 and 4, I will point out a
number of reasons why devaluation is unlikely to make Vietnam trade balance better as
follows:

20

Firstly, chapter 3 shows the relationship between the nominal exchange rate and the
real exchange rate of Vietnam. Recently, these two exchange rates have tended to move in
opposite directions. Vietnam's bilateral exchange rate with the three partners has appreciated
in recent years. Therefore, the problem here is that the relatively rigid exchange rate regime
currently adopted by Vietnam was followed by a currency appreciation. As a result, Vietnam's
exports tended to lose competitiveness. In the long term, the appreciation of the VND will
make it difficult for Vietnam to improve and maintain a trade surplus. The highly appreciated

currency also reduces the effectiveness of the devaluation policy on trade balance.
Secondly, Vietnam’s exports remain heavily dependent on imported goods. On the
other hand, the possibility of import substitution is quite low. The dependence on imports
makes the trade balance less sensitive to currency depreciation, especially in the case of
Vietnam-US trade.
Thirdly, the foreign direct investment (FDI) sector contributed 72% to Vietnam's total
exports turnover. Key export items include high-tech products such as phones, computers,
electrical and other mechanical. This contribution also leads to an increase in the import of
materials and components. The intensive participation in the global value chains of FDI
enterprises will lead to a decrease in the effectiveness of the exchange rate tool (especially in
the case of currency devaluation).
Fourthly, Vietnam’s export products have relatively low competitiveness. The reason
is that the current level of technological endowment of Vietnam is fairly low and modest. In
addition, the poor quality of human resources remains a huge problem whichleads to the poor
performance of Vietnamese labour productivity. It is the low competitiveness that makes it
difficult to find new markets or expand markets and seize available opportunities for
improving the country’s export performance when the depreciation exchange rate policy is
adopted. In other words, the weak competitiveness of export products reduces the
effectiveness of the exchange rate depreciation.
5.2. Policy implications for each trading partner
For the Vietnam-China, the results indicate that trade balance is less sensitive to
exchange rate changes. Therefore, it can be affirmed that there are no feasible measures for
Vietnam to limit trade deficit with China (provided that Vietnam's exchange rate management
policy does not change much). In order to reduce the dependence on imports from China,
Vietnam needs to increase the manufacturing production capacity of supporting industries
while pushing the search for alternative import markets such as ASEAN markets.
For Vietnam-US trade, the result models show that an exchange rate depreciation does
not improve trade balance but even makes the situation worse. Therefore, it is not easy to use
the exchange rate as a tool to improve the Vietnam-US trade balance.
For Vietnam-Japan trade, the NARDL model results indicates that trade balance will

be improved in the case of VND depreciation. Meanwhile, trade balance does not react to an
exchange rate appreciation.


21

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CONCLUSION
Thus, the exchange rate is likely to be an effective tool to improve Vietnam's trade
balance with this trading partner.
5.3. Policy implications for each commodity
5.4. General policy recommendations
Firstly, the study indicates that the use of exchange rates as a tool to promote exports
and improve the trade balance of Vietnam should be considered based on various priority
objectives and policy coordination.
Secondly, trade balance is a macroeconomic variable that depends on many different
factors: (i) the influential factors of the quality of export products, (ii) relative prices including
exchange rates. The analyses in chapter 3 and chapter 4 show that Vietnam is facing structural
problems in production and export. Moreover, the dependence of import performance on
foreign markets, especially China, also reduces the positive effects of VND devaluation on
trade balance. Therefore, the study proposes some policy implications in addition to the
exchange rate policy to boost exports, improve trade balance, and improve the efficiency of
exchange rate instruments in regulating Vietnam's trade as follows:
- Developing auxiliary industries, enhancing self-control capacity to ensure raw
materials source of exported products, increasing the localization rate of export products,
especially for key industries such as electrical equipment, mechanical machinery and
equipment, footwear, textile.
- Vietnam should also be cautious about the quality of many FDI projects while
proactively supporting and protecting domestic manufacturing enterprises,or tightening the

conditions for FDI enterprises. The country should develop appropriate sanctions for FDI
enterprises in case of violations to actively push for technology transfer and engage domestic
enterprises in the supply of input materials.
- Developing human resources, improving labour productivity in manufacturing
enterprises, improving the competitiveness of Vietnam's export products.

1. Conclusion
Based on the analysis of the relationship between exchange rates and trade balance,
the thesis has achieved some results as follows:
Firstly, the thesis presented and introduced the theoretical basis for the relationship
between exchange rates and trade balance. As a result, we have generalized the development
history of theoretical literature on the relationship between exchange rates and trade balance.
Secondly, the thesis has reviewed both international and Vietnamese empirical studies
on the relationship between exchange rates and trade balance. Thereby, the study has pointed
out the research gap about the relationship between exchange rates and the trade balance of
Vietnam.
Thirdly, the combination of qualitative and quantitative analysis in the thesis has led
to the following conclusions: (i), the exchange rate’s impact on trade balance varies across
trading partners and commodities, (ii) trade balance is more sensitive to exchange rates in
case of Viet-US trade and Vietnam-Japan trade than in Vietnam-China trade (iii) the exchange
rate’s impact on trade balance is asymmetric. From the findings, the thesis also gave some
policy recommendations as follows:
- In the Vietnam's context, the use of currency devaluation should be considered based
on priority objectives and the coordination between different policies. An exchange rate
depreciation can lead to undesirable outcomes for a developing economy that is dependent on
imported raw material inputs with a low possibility of import substitution like Vietnam.
- The implementation of fiscal policy instruments and economic restructuring, the
promotion of auxiliary industries, and the enhancement of the competitiveness of export firms
should be performed in practice to improve trade balance rather than using the exchange rate
tool.

2. Recommendations for future research directions
- Adding the impact of the global value chains when examining the relationship
between exchange rates and trade balance.
- Considering cross-border trade in the relationship between exchange rates and trade
balance in the case of Vietnam-China trade.


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THE LIST OF AUTHOR'S PUBLICATION RELATED TO THESIS
1. Tran Thi Ha (2018), "The impact of exchange rate on trade balance between
Vietnam and US in 2008-2017", Review of World Economic and Political Issues, 10
(270)/2018
2. Tran Thi Ha (2016), "The impact of exchange rate on imports of key products from
China to Vietnam", Journal of Economics and Development, 9/2016
3. Tuan Anh Pham, Ha Tran Thi, Nguyen Manh Hung (2019), "The impact of exchange
rates on Vietnam-China bilateral trade", JATI-Journal of Southeast Asian Studies', 24.1
(2019): 70-96
4. Ha Thi Tran (2018), Impact of exchange rate on China-Vietnam bilateral trade:
findings from ARDL approach, Hội thảo "Vietnam Economics Annual Meeting".