The Effect of Devaluation on Trade Balance in Vietnam

• Main Authors: Nong, Ngoc-Du, 农玉諭
• Other Authors: Hsu, Ching-Chun
• Format: Others
• Language: en_US
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/50229331992422068471

碩士 === 國立宜蘭大學 === 應用經濟與管理學系經營管理碩士班 === 102 === The Vietnamese Dong (VND) was pegged to the United States Dollar (USD), during the 1990s. The Vietnamese government controlled exchange rate to encourage exports and improve the trade balance (TB), while to aim ensuring low inflation and stability of economy. The results in long run and short run of Nguyen and Kalirajan (2006) suggest that devaluation in the 1990s can be implemented to encourage exports and to improve current account balance and balance of payment, and also to reduce the real exchange rate appreciation in the short run. In 2000 Vietnam and United States bilateral trade agreement (BTA) were signed. Vietnam also joined to WTO in 2006. Besides the opening economy, Vietnamese authority has been used exchange rate with crawling peg and crawling bands. From1999 to 2006 VND devalued about 17.76% against to the USD, and also devalued about 29.37% against with the USD in the period from 2007 to 2011. The study is determined effect of devaluation on trade balance in Vietnam during the 1999 – 2011 through evaluation, measurement and analysis by cointegration and vector error correction model. The findings suggest that there is a stable long-run relation among trade balance, exchange rate, GDP of Vietnam and GDP of main trading partners. The changes in exchange rate have positive and statistically significant short run effect on trade balance, while there is no evidence of the J-curve effect can detect between Vietnam and main trading partners.