The Impact of Real Exchange Rate to Trade Balance in Vietnam

Abstract

This paper applies a Vector autoregression model to estimate the impact of the real exchange rate to trade balance in Vietnam by using monthly data from Jan 2008 to Jan 2012. The results include three main findings: (i) There does not exist evidence of a relationship among real effective exchange rate, trade balance and domestic output, (ii) the J-curve pattern is invalid for the case of Vietnam and the depreciation of real exchange rate in Vietnam impacts negatively on the trade balance, (iii) the real exchange rate does not comprise significantly in determining the variations of the trade balance.