Moreover, this study examines some factors that affect Vietnamese exports, which are foreign national income, bilateral real exchange rale and exchange rate volatility.. The results show
ABSTRACT
This research investigates the influence of exchange rates on Vietnamese exports to key trading partners, the United States and the European Union, while also considering factors such as foreign national income, bilateral real exchange rates, and exchange rate volatility Utilizing monthly data from 2008 to 2022 and the GARCH model to assess exchange rate volatility, the study examines both overall Vietnamese export values and the export values of five specific commodities The ARDL method is employed to evaluate the short- and long-term effects of exchange rates on exports Findings reveal that short-run exchange rate volatility significantly affects exports of wood products, seafood, and cashew nuts to the US, as well as textiles, seafood, and coffee to the EU, along with total exports to both regions Additionally, long-run volatility impacts Vietnamese products exported to these partners, while foreign national income positively influences US exports and most EU products, except textiles and coffee The bilateral exchange rate also plays a crucial role in determining the performance of Vietnamese exports.
Keywords: Vietnamese products, exchange rate volatility, bilateral exchange rate, national income, GARCH, ARDL model
III LIST OF TABLES AND FIGURES 5
1.1 Reasons for choosing the topic 8
Chapter 2: Literature review and hypothesis development 11
2.1 Theoretical basis of exchange rate and export 11
2.2.1 The impact of real exchange rate on export 13
2.2.2 The impact of exchange rate volatility on export 14
2.2.3 The impact of foreign national income on export 15
2.3.2 Limitations of previous studies and our contribution 21
2.4 Overview of Vietnam’s export in the period 2008-2022 22
3.3.2 Testing the cointegration between the variables and selecting the optimal lag for the model 36
3.3.3 Estimating the long-run coefficient 37
3.3.4 Estimating the short-run coefficient 37
3.3.5 Checking the stability of the model 37
Chapter 4: Research results and Discussion 38
4.2.1 Result of testing for stationarity of data series 43
4.2.2 Using the regression model GARCH(1,1) to find out the volatility of the real exchange rale 14 45
4.2.3 Results of the cointegration test 48
4.2.4 Results of long-run equation estimation 50
4.2.5 Results of short-run equation estimation 51
4.2.6 The stability test of the estimated coefficients 52
4.3.1 Analysis of Vietnamese total exports to the United States and the European Union 55
4.3.2 Analysis of the United States 56
4.3.3 Analysis of the European Union 59
III LIST OF TABLES AND FIGURES
Table 1: Research results of previous studies 16
Table 2: The value of the top five Vietnamese goods exported to the US and EU in
Table 3: Summary of research variables 34
Table 5: Result of unit root test 44
Table 6: GARCH(1,1) for the US 45
Table 7: GARCH(Ll) for the EU 46
Table 8: Unit root test for exchange rate volatility 46
Table 9: Summary of unit root test 47
Table 12: Long-run estimation result 50
Table 13: Short-run estimation result 51
Table 14: Serial correlation test result 52
Table 16: CUSUM and CUSUMSQ test result 54
Table 17: Summary of short and long-term estimations for total Vietnamese export to the US and the EU 55
Table 18: Summary of short and long-run estimations for the United States 56
Table 19: Summary of short and long-run estimations for the European Union 59
Figure 1: Top export markets of Vietnam from 2020 to 2022 24
Figure 2: Export of Vietnam to the United States from 2008 to 2022 28
Figure 3: Export of Vietnam to the European Union from 2008 to 2022 29
Figure 4: The distribution of total Vietnam export value to the United States and the
Figure 5: The distribution of top 5 Vietnamese products export's value to the US 40
Figure 6: The distribution of top 5 Vietnamese products export’s value to the EU 41
Figure 7: The distribution of IIP, RER and V of the US and the EU 42
AFT Agency of Foreign Trade
ASEAN Association of Southeast Asian Nations
CUSUM Cumulative Sum of Recursive Residuals
CUSUMSQ Cumulative Sum of Square of Recursive Residuals
ECM Error Con*ection Model
EVFTA European-Vietnam Free Trade Agreement
GARCH Generalized Autoregressive Conditional Heleroskedasticity GDP Gross Domestic Product
HAC Heteroskedasticity- and autoconelation-consistent
IIP Index of Industrial Production
Bilateral real exchange rate Schwartz's Information Criterion United States
Real exchange rate volatilityVietnam Chamber of Commerce and IndustryThe World Trade Organization
1.1 Reasons for choosing the topic
The study of exchange rates and their impact on international trade is increasingly important for economists and businesses, particularly in emerging economies like Vietnam As Vietnam engages in economic integration, it has become a vital trade partner globally, with significant growth in bilateral trade since joining the World Trade Organization (WTO) in 2007 The United States has emerged as Vietnam's leading export market, while the European Union has also become a key trading partner, especially following the European-Vietnam Free Trade Agreement in 2020 Understanding the dynamics of exchange rates is crucial for assessing Vietnam's export performance and overall economic development This research investigates the effects of exchange rate volatility on Vietnamese exports to the U.S and the EU from 2008 to 2022.
Vietnam's economic growth has been significantly driven by exports, transforming the nation from an agrarian economy to a dynamic, export-oriented one The export sector is essential for economic expansion, job creation, and foreign exchange earnings, particularly in key industries such as footwear, textiles, wood products, seafood, cashew nuts, and coffee The performance of these industries is heavily influenced by exchange rates, making it vital to understand the factors affecting export performance This knowledge is crucial for developing effective trade policies that support key industries and promote sustained economic growth in Vietnam.
The Computers, Electrical Products & Parts industry in Vietnam has seen remarkable growth of 25.6% from 2011 to 2022, establishing itself as the country's second largest export sector, following textiles However, this industry remains in the early stages of the electronic production chain, heavily dependent on foreign direct investment due to limited deep processing capabilities, advanced technology, and intelligence content This research focuses on the exports of traditional industries where Vietnam holds a significant market position, highlighting the impact of exchange rates on the proportion of Vietnam's goods exports.
The exchange rate serves as a crucial monetary measure that significantly impacts the sustainability of a nation's economy, politics, society, and foreign investment, while also influencing public confidence in the national currency In a trade-dependent economy like Vietnam, fluctuations in currency value can lead to severe repercussions, including disrupted trade flows, increased uncertainty for exporters and importers, and diminished profit margins Additionally, exchange rates often diverge from their fundamental conditions due to various factors, including macroeconomic forces, market sentiment, global shocks, and speculation.
This research provides valuable insights for policymakers and businesses in Vietnam, enabling them to address the challenges posed by exchange rate volatility on exports By identifying key factors that affect trade outcomes, policymakers can create targeted strategies to boost export competitiveness and protect domestic industries Furthermore, businesses can leverage these insights to improve their risk management approaches and seek opportunities to diversify their markets and product offerings in response to currency fluctuations.
Understanding the impact of exchange rate volatility is crucial for enhancing Vietnam's export competitiveness, a key driver of the nation's economic growth This study explores various factors affecting Vietnamese exports, with a particular focus on how fluctuations in exchange rates influence export performance By highlighting the significance of these dynamics, the research aims to provide insights that can strengthen economic resilience in an ever-changing global market, while also addressing the relatively underexplored area of Vietnamese export research.
This research aims to analyze the effect of exchange rates on Vietnam's export growth, focusing on its primary trading partners, the United States and the European Union, from 2008 to 2022 Additionally, the study seeks to offer strategies for enhancing export performance.
To address the aforementioned research aims, the authors will solve the following questions:
• What direction do exchange rates affect the export of Vietnamese products to the
US and EU and what is the magnitude of this impact?
The relationship between real foreign national income, relative export prices, and exchange rate volatility significantly impacts Vietnam's export value to the US and EU Both short-term and long-term dynamics play a crucial role in determining how these economic factors influence export performance Understanding these relationships is essential for optimizing Vietnam's export strategies and enhancing trade with key markets like the US and EU.
• Research objects: The topic chooses foreign national income, bilateral real exchange rate, real exchange rate volatility as well as export value as the research objects.
• Research scope: Data on export value, foreign national income, bilateral real exchange rate, real exchange rate volatility is collected monthly for the period from 2008 to 2022.
The study employs the research methodology of Sugiharti et al (2020), utilizing a GARCH model to assess exchange rate volatility and the ARDL method to analyze the impact of exchange rates on exports in both the short and long term To ensure the reliability of the ARDL approach, the authors verify that the research variables are stationary and determine the optimal time lag This includes conducting unit root tests, cointegration tests, serial correlation tests, heteroskedasticity tests, and stability tests.
The research is divided into five chapters, which are as follows:
Chapter 2: Literature review and hypothesis development
Chapter 4: Research results and discussion
Chapter 2: Literature review and hypothesis development
2.1 Theoretical basis of exchange rate and export
An exchange rate represents the value at which one country's currency can be exchanged for another's, reflecting the purchasing power parity between domestic and foreign currencies It also illustrates the supply and demand dynamics of a country's currency in relation to foreign currencies.
The exchange rate serves as a crucial tool for evaluating the value of a domestic currency against foreign currencies, enabling comparisons of domestic goods prices with international prices and assessing labor productivity relative to other countries Essentially, it reflects the relative value of two currencies in the global market.
Or one can say the exchange rate is the price of one unit of one country's currency expressed in terms of another country's currency (Ngân et al., 2014).
The nominal exchange rate is the daily trading rate in the foreign exchange market, representing the domestic price of a foreign currency or the foreign price of the local currency It is an unadjusted rate that does not account for the overall price levels of goods and services (Krugman et al., 2012).
The real exchange rate, defined as the nominal rate adjusted for the correlation of domestic and foreign prices, plays a crucial role in international trade (Krugman et al., 2012) A decline in a country's real exchange rate indicates that its exported goods have become more expensive, making it harder to compete in foreign markets unless other countries experience a similar price increase Thus, the real exchange rate serves as a key indicator of a nation's international competitiveness (Thơ et al., 2008).
Exporting involves selling goods to international markets for profit, supported by a structured sales system that enhances both domestic and foreign trade This activity promotes increased production of commodities, drives economic reform, stabilizes the economy, and ultimately improves the living standards of the population (Thân & Tuan, 2018).