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Vietnam’s Real Exchange Rate and Trade Balance: The Effect of Exchange Rate Regime Changes and Analysis of Major Trading Partners

  • Journal of Asia-Pacific Studies
  • Abbr : JAPS
  • 2025, 32(1), pp.91~121
  • DOI : 10.18107/japs.2025.32.1.004
  • Publisher : Institute of Global Affairs
  • Research Area : Social Science > Social Science in general
  • Received : February 25, 2025
  • Accepted : March 21, 2025
  • Published : March 30, 2025

Bui Huy Hoang 1,  Yeonjeong Ha 2

1경상국립대학교 경영대학 국제통상학과
2경상국립대학교

Accredited

ABSTRACT

This study analyzes the impact of Vietnam’s real exchange rate on the trade balance, focusing on the effect of exchange rate regime changes and analysis of major trading partners. The results of the analysis using VAR and ARDL models are as follows. First, the study confirms that changes in Vietnam’s exchange rate regime significantly influence the relationship between the real exchange rate and the trade balance. Under the managed floating exchange rate system before 2016, the central bank's intervention limited the impact of the real exchange rate on the trade balance. However, after transitioning to a managed floating exchange rate with central parity mechnism in 2016, the trade balance response to real exchange rate became more pronounced, and the J-curve effect was clearly observed. Second, the results of analyzing the major trading partners showed that there were differences in the relationship between the exchange rate and the trade balance. The trade balance with the United States showed a positive impact of exchange rate depreciation in both the short and long term. The trade balance with China showed a positive impact of exchange rate depreciation in long term. Meanwhile, the impact of the real exchange rate on the trade balance with South Korea was less significant compared to the United States and China. The significance of this study lies in confirming that the relationship between Vietnam's real exchange rate and trade balance changes according to the exchange rate system and showing that differences occur across major trading partners. The findings provide important policy implications for the Vietnamese government in effectively managing exchange rate and trade policies.

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