Impacts of Oil Shocks on Vietnam’s Trade Balance and Recommendations

This paper aims at examining impacts of oil shocks on Vietnam’s balance of trade and causal relationship between the balance of trade and relevant macro factors. Bound testing approach and ARDL are applied to data from Quarter I of 1999 to Quarter IV of 2011. The results demonstrate a negative relationship between oil price, exchange rate and trade balance in Vietnam. More specifically, a one-percent increase in the oil prices and exchange rate causes the trade balance to fall by 0.12% and 0.79% respectively in the long run. In the short run, however, international exchange rates and oil pricesare positively corrrelatedwith Vietnam’s trade balance. These findings allow some recommendations and suggestions for policy makers in an effort to reduce negative effects of oil shocks on Vietnam’s trade balance.

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FENOMENA KURVA J PADA NERACA PERDAGANGAN INDONESIA DENGAN ENAM NEGARA MITRA DAGANG UTAMA

JURNAL DINAMIKA EKONOMI PEMBANGUNAN ◽

10.14710/jdep.1.2.10-27 ◽

2018 ◽

Vol 1 (2) ◽

pp. 10

Author(s):

Anggraeni Tri Hapsari ◽

Akhmad Syakir Kurnia

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Bilateral Trade ◽

Long Run ◽

J Curve ◽

Bilateral Trade Balance ◽

Trading Partners ◽

Short Run ◽

Balance Of Trade ◽

The Exchange Rate

Whether a J curve phenomenon exists or not on the balance of trade has been an interest for empirical investigation in international economics. The phenomenon is typically associated with the response of the balance of trade to the exchange rate dynamics. Since a country has different trade features with different trading partners, the trade balances adjustment to the exchange rate dynamics should be seen as a head to head phenomenon. This paper investigates the effect of real effective exchange rate (REER) on the bilateral trade balance between Indonesia and its six major trading partners, namely Japan, China, Singapore, United States, South Korea and India on a quarterly basis over the period 1995.1 to 2013.4. The short run and the long run effect of the REER on the balance of trade is expected to be captured using error correction model (ECM) and vector error correction model (VECM). Subsequently, impulse response function is used to trace out the behavior of the bilateral trade balance in response to the REER shock whereas forecast error variance decomposition (FEVD) is used to decay the effect of innovation variables in the system. The result indicates that in the long run a J curve phenomenon appears on the bilateral trade balance between Indonesia and Japan, China, Singapore as well as South Korea. In the short run, a J curve phenomenon is seen on the bilateral trade balance between Indonesia and China as well as Singapore. This confirms that a J curve is a head to head phenomenon that has correlation with the trade features. Thus, the correction mechanism to the trade balance in response to the exchange rate shock (i.e. exchange rate market intervention) should count trade features as a consideration

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Currency Depreciation, Trade Balance and Intra-Industry Trade Interactions in Turkey’s OECD Trade

International Journal of Economics and Finance ◽

10.5539/ijef.v8n4p8 ◽

2016 ◽

Vol 8 (4) ◽

pp. 8 ◽

Cited By ~ 1

Author(s):

Mehmet Demiral

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Real Effective Exchange Rate ◽

Series Data ◽

Adjustment Process ◽

Industry Trade ◽

Long Run ◽

Effective Exchange ◽

Short Run ◽

Effective Exchange Rate

This study re-examines the determinants of Turkey’s trade balance in its manufactures trade with 33 OECD-member countries for the short-run and the long-run. Unlike other studies, in the relationships we also control the moderating effects of the availability of import substitutes proxied by intra-industry trade. We analyze quarterly aggregated time-series data of the period spanning from 1998.QI to 2015.QIII, following the autoregressive distributed lag (ARDL) bounds testing approach to the cointegration and the error correction modeling. Estimation results reveal that real effective exchange rate, together with domestic and foreign incomes are still among the core determinants of Turkey’s trade balance in the manufacturing sectors. There is no significant impact of domestic final oil prices that also include all the taxes on gasoline. The trade balance depends on domestic income negatively and the aggregated income of the OECD countries positively. The finding that real depreciation of Turkish lira against to those of Turkey’s OECD trade partners improves trade balance in both the short-run and the long-run, indicates no evidence of J-curve adjustment process. Unsurprisingly, the intra-industry trade seems to be an important factor that moderates the elasticities of trade balance to its determinants, especially to real effective exchange rate and domestic income. Overall results underline the importance of import-substitution capability besides the export-oriented production to ease the longstanding large trade deficits for Turkey.

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The Effect of Real Exchange Rate on Trade Balance in a Resource-Rich Economy: The Case of Mongolia

Foreign Trade Review ◽

10.1177/0015732518797184 ◽

2018 ◽

Vol 53 (4) ◽

pp. 211-224 ◽

Cited By ~ 2

Author(s):

Gan-Ochir Doojav

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

Developing Economies ◽

Jel Classification ◽

Vector Error Correction ◽

Vector Error ◽

Long Run ◽

Short Run ◽

Exchange Rate Depreciation

For resource-rich developing economies, the effect of real exchange rate depreciation on trade balance may differ from the standard findings depending on country specific characteristics. This article employs vector error correction model to examine the effect of real exchange rate on trade balance in Mongolia, a resource-rich developing country. Empirical results show that exchange rate depreciation improves trade balance in both short and long run. In particular, the well-known Marshall–Lerner condition holds in the long run; however, there is no evidence of the classic J-curve effects in the short run. The results suggest that the exchange rate flexibility may help to deal effectively with current account deficits and exchange rate risk. JEL Classification: C32, C51, F14, F32

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Effects of Bilateral Real Exchange Rate on Sino-Nigeria Trade: An ARDL Cointegration Approach

International Journal of Economics and Finance ◽

10.5539/ijef.v10n7p125 ◽

2018 ◽

Vol 10 (7) ◽

pp. 125

Author(s):

Julio Felippe Bicudo ◽

Nnanna P. Azu

Keyword(s):

Exchange Rate ◽

Bilateral Trade ◽

Bilateral Exchange ◽

Long Run ◽

Rate Fluctuation ◽

Ardl Approach ◽

Short Run ◽

Negative Role ◽

Balance Of Trade ◽

Negative Balance

This research is motivated to scrutinise the effects of real bilateral exchange rate fluctuation on China-Nigeria bilateral trade, taking into consideration volatility and third country’s bilateral exchange rate effect to determine their consequences. Due to its robustness in time series analyses, an ARDL approach to co-integration was used to determine the long-and short-runs effects. Both export and import were considered separately. Outcome revealed that Nigeria’s import from China responds negatively to real bilateral exchange rate increase just as it does to its volatility. Her export to China reacts positively on both front, most especially in the short-run. Japan was integrated as a third country in this research due to her competing presence in Nigerian market. Third country’s real bilateral exchange rate play prominent but negative role in China-Nigeria trade, and is mostly effective in the long-run. With the absolute value of the co-efficient of real bilateral exchange rate greater than one, depreciating the Naira against the Renminbi will tend to ameliorate the negative balance of trade Nigeria has with China. Finally, democratic regime was found to be very essential in enhancing international business.

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Research On Monetary Neutrality: Evidence From Exchange Rate And Trade Balance Of G-7 Countries

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v24i2.1351 ◽

2011 ◽

Vol 24 (2) ◽

Cited By ~ 1

Author(s):

Doh-Khul Kim

Keyword(s):

Exchange Rate ◽

Real Exchange Rate ◽

Trade Balance ◽

Monetary Shocks ◽

Font Size ◽

Long Run ◽

Short Period ◽

Short Run ◽

Monetary Neutrality ◽

Nominal Shocks

According to a recent paper by Fisher and Huh (2002), in contrast to a long-run neutrality hypothesis, nominal shocks have long-run effects on a country’s real exchange rate and trade balance. However employing a similar method (VAR) with identical restrictions (long-run neutrality and short-run recursive hypotheses), this paper shows that the effects on the real exchange rate are much shorter in this G-7 country study than what Fisher and Huh (2002) contend. Further, the trade balance improves for a short period of time, from which it can conclude there is a shorter existence of the depreciation effect in response to expansionary monetary shocks, which supports the long-run neutrality hypothesis in an open macroeconomic framework.

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Different Approaches to Merchandise Trade Balance in Pakistan

Global Business Management Review (GBMR) - Vol 12 No 2 (2020): Global Business Management Review ◽

10.32890/gbmr2020.12.2.2 ◽

2020 ◽

Vol 12 (Number 2) ◽

pp. 19-30

Author(s):

Yousuf Aboya ◽

Arsalan Hussain ◽

Rohail Hassan ◽

Hassan Mujtaba Nawaz Saleem ◽

Aamir Hussain Siddiqui

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Trade Deficit ◽

Real Effective Exchange Rate ◽

Series Data ◽

Long Run ◽

Effective Exchange ◽

Short Run ◽

Merchandise Trade ◽

Effective Exchange Rate

The current study empirically examines the three major approaches to trade balance for Pakistan by utilizing the yearly data from 1972 to 2016. Monetary, elasticity, and absorption approaches were tested by developing a model that incorporates all three approaches. The significant contribution of the study is that it uses only the merchandise trade deficit account, which includes trade of only physical goods. The study used time-series data; therefore, variables have been tested for the stationarity, and it is found that there is a combination of I (0) and I (1) variables, so ARDL bounds testing approach to co-integration has been employed to find the short run and long run associations among the variables. The bound test results discovered that there is a presence of stable long-term association among the merchandise trade deficit account, real broad money supply, real effective exchange rate, and real domestic absorption. The results further revealed that merchandise trade discrepancy is determined purely by the real effective exchange rate, which specifies that the exchange rate's devaluation increases the deficit in the long run whereas in the short-run increase in domestic absorption decreases the merchandise trade deficit.

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Short-run and long-run effects of exchange rate change on trade balance: Evidence from China and its trading partners

Japan and the World Economy ◽

10.1016/j.japwor.2012.07.001 ◽

2012 ◽

Vol 24 (4) ◽

pp. 266-273 ◽

Cited By ~ 19

Author(s):

Chun-Hsuan Wang ◽

Chun-Hung A. Lin ◽

Chih-Hai Yang

Keyword(s):

Exchange Rate ◽

Trade Balance ◽

Rate Change ◽

Exchange Rate Change ◽

Long Run ◽

Trading Partners ◽

Short Run

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Exchange-Rate Volatility and Industry Trade Between Japan and China

Global Economy Journal ◽

10.1515/1524-5861.1855 ◽

2012 ◽

Vol 12 (3) ◽

pp. 1850268 ◽

Cited By ~ 1

Author(s):

Mohsen Bahmani-Oskooee ◽

Scott W. Hegerty ◽

Jia Xu

Keyword(s):

Exchange Rate ◽

Bilateral Trade ◽

Exchange Rate Volatility ◽

Trade Flows ◽

Negative Effects ◽

Exchange Rate Uncertainty ◽

Long Run ◽

Bilateral Trade Flows ◽

Short Run ◽

Export Industries

Exchange-rate risk is often thought to reduce international trade flows, but numerous theoretical and empirical analyses have pointed toward positive as well as negative effects. This is particularly true when bilateral trade flows for individual industries are estimated. In this study, we extend the literature to the case of Japanese trade with China for 110 import industries and 95 export industries. Aggregate Japanese exports, but not imports, respond to real exchange rate volatility in the long run, while most individual export and import industries respond in the short run. Although many individual Japanese import industries are affected in the long run by risk, mostly negatively, this is even more the case for exporters. A larger proportion of Japanese export industries are affected by exchange rate uncertainty for most industry sectors. Manufacturing exports are particularly vulnerable to this risk, with a large share responding negatively to increased volatility.

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Yuan-Dollar Real Exchange Rate and the U.S. Real Trade Balance with China: Long-Run Cointegration and Short-Run Dynamic Analysis

The International Trade Journal ◽

10.1080/08853908.2021.2008282 ◽

2021 ◽

pp. 1-24

Author(s):

Anisul M. Islam

Keyword(s):

Exchange Rate ◽

Dynamic Analysis ◽

Real Exchange Rate ◽

Trade Balance ◽

Long Run ◽

Short Run ◽

The U.S

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Linear and Nonlinear Dynamics of the Turkish Trade Balance

International Journal of Economics and Finance ◽

10.5539/ijef.v8n2p70 ◽

2016 ◽

Vol 8 (2) ◽

pp. 70 ◽

Cited By ~ 2

Author(s):

Huseyin Karamelikli

Keyword(s):

United States ◽

United Kingdom ◽

Exchange Rate ◽

Trade Balance ◽

Bilateral Trade ◽

Time Series Data ◽

Series Data ◽

Long Run ◽

J Curve ◽

Short Run

This study empirically analyses bilateral trade of Turkey with her main trade partners using monthly time series data over the period of 2000 to 2015. J-curve theory and short-run dynamics of bilateral trade is tested by linear ARDL and Non-linear ARDL approaches. The empirical results indicate that there is no J-curve effect during short-run for United States and for France; it symmetrically exists to Germany and asymmetrically to United Kingdom. Also long-run relationship between exchange rate and trade balance has mixed results. Asymmetric long-run relationship between exchange rate and trade balance for United States exists where it is symmetrically most appropriate for Germany. In the other hand this study failed to verify any long-run relationship between exchange rate and trade balance for France and for United Kingdom.

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