Nguyen Thi Kim Lien
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Trade openness and real effective exchange rate volatility: The case of Vietnam
Nguyen Thi Kim Lien , Thu-Trang Thi Doan , Toan Ngoc Bui doi: http://dx.doi.org/10.21511/bbs.17(1).2022.13Banks and Bank Systems Volume 17, 2022 Issue #1 pp. 150-160
Views: 665 Downloads: 580 TO CITE АНОТАЦІЯ2004–2020. The study was conducted in the context that Vietnam’s trade openness is increasing, causing significant challenges in macro management, including exchange rate management. The authors use vector autoregression model and Granger causality test to test this relationship. The study used a vector autoregression model and Granger causality test to investigate the causal relationship between trade openness and real effective exchange rate volatility in Vietnam over the period 2004–2020. The study was conducted in the context of Vietnam’s trade openness index rising, causing significant challenges in macro management, including exchange rate management. The study takes a new approach (i) using Vietnam’s real effective exchange rate relative to 143 trading partners; and (ii) examining the impact of economic growth on trade openness and exchange rate volatility. The research results indicate that trade openness has a two-way Granger causality with effective real exchange rate volatility in Vietnam at the 1% significance level. Specifically, the effect of trade openness on real exchange rate volatility is positive at a 1-period lag and 4-period lag. Meanwhile, real exchange rate fluctuations have a negative effect on trade openness with a 1-period lag. At the same time, the study also finds that increased economic growth reduces real effective exchange rate volatility and increases Vietnam’s trade openness. On that basis, the study proposes implications for the management of trade openness and exchange rate management in the current Vietnamese context.
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An empirical study of the real effective exchange rate and foreign direct investment in Vietnam
Tram Thi Xuan Huong , My-Linh Thi Nguyen , Nguyen Thi Kim Lien doi: http://dx.doi.org/10.21511/imfi.17(4).2020.01Investment Management and Financial Innovations Volume 17, 2020 Issue #4 pp. 1-13
Views: 1339 Downloads: 639 TO CITE АНОТАЦІЯForeign direct investment (FDI) inflows to Vietnam have increased significantly in recent years. Theoretically, capital inflows will put pressure on the overvaluation of local currencies in countries, despite different exchange rate mechanisms. So, the problem facing the Vietnamese government is the need to examine the relationship between the exchange rate and FDI in order to develop effective policies. This study examined the relationship between the exchange rate and FDI in Vietnam in the period of 2005–2019 using the VAR (vector autoregression) model based on quarterly frequency data. The new points of this study are: (i) using the real effective exchange rate (REER) of the Vietnamese currency with 143 major trading partners of Vietnam; and (ii) adding two control variables into the VAR model to examine the relationship between the exchange rate and FDI in Vietnam – a case study for developing countries. The findings show that, firstly, there is a positive causal relationship between FDI and Vietnam’s real effective exchange rate. Secondly, trade openness has a positive impact on FDI and REER in Vietnam. Thirdly, economic growth has an impact on REER, but no statistically significant impact on FDI was found. The findings can provide useful information to help policymakers plan and make decisions on future policies and support further research studies.
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