Real Effective Exchange Rate, Broad Money Supply, and Trade Balance in Vietnam: An Empirical Analysis from Bounds Test to a Cointegration Approach

2020 ◽  
Author(s):  
Kieu Oanh Dao ◽  
V.C. Nguyen ◽  
Si Tri Nhan Dinh
Keyword(s):  
Exchange Rate ◽  
Money Supply ◽  
Trade Balance ◽  
Negative Impact ◽  
Positive Impact ◽  
Real Effective Exchange Rate ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

This paper aims to investigate the impact of the real effective exchange rate and broad money supply on the trade balance in Vietnam using quarterly data from the first quarter of 2000 to the fourth quarter of 2018. Using the ARDL-ECM approach to investigate this effect, a cointegration relationship exists between real effective exchange rate, broad money supply and trade balance. Results demonstrate that real effective exchange rate has a short-term negative impact on trade balance. Additionally, broad money supply has a positive impact on trade balance in the short run and long run with a very weak effect. Surprisingly, it was found that real foreign income and local income have no impact on trade balance.

scholarly journals Determinants of Non-Performing Loan in Nepalese Commercial Banks

2017 ◽  
pp. 22-38 ◽  
Author(s):  
Seema Bhattarai
Keyword(s):  
Exchange Rate ◽  
Commercial Banks ◽  
Negative Impact ◽  
Positive Impact ◽  
Percent Level ◽  
Real Effective Exchange Rate ◽  
Macroeconomic Variables ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

The non-performing loans (NPL) of financial institutions are considered as a significant issue in the context of Nepal for last few decades. The paper aims to identify the impact of macroeconomic variables (GDP, Inflation, and Real Effective Exchange Rate) and bank specific variables (size, change in loan, real lending rate of interest, and share of loan to total assets) on the non-performing loan of the commercial banks in Nepal. The study was conducted mainly with secondary sources. The data were collected for 26 commercial banks covering the period of 2002-2012 with 227 observations. The study found that macroeconomic variables such as the real effective exchange rate have significantly negative impact on non-performing loan. The impact of GDP growth rate was found to be insignificant in this study. One year lagged inflation rate has significant positive impact on non-performing loan. The banks which charge relatively higher real interest rate have higher non-performing loan, which is consistent with the findings of previous studies. The ownership dummy has positive coefficient and significant at one percent level showing that if the bank is government owned the non-performing loan would be higher than that of the private owned banks. As well, more lending in the previous years and current year reduces the non-performing loan since the coefficient of change in loan in current and previous years have negative coefficient and significant at one percent level.Economic Journal of Development Issues Vol. 19 & 20 No. 1-2 (2015) Combined Issue, Page: 22-38

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

2016 ◽  
Vol 8 (4) ◽  
pp. 8 ◽  
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

<p>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.</p><strong></strong>

scholarly journals Different Approaches to Merchandise Trade Balance in Pakistan

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.

Analyzing the Impact of Real Effective Exchange Rate and Investment on Trade Deficit in the United Kingdom

2021 ◽  
Vol 9 (2) ◽  
pp. 241-249
Author(s):  
Allah Ditta ◽  
Ruqayya Ibraheem ◽  
Muahammad Ayub
Keyword(s):  
United Kingdom ◽  
Exchange Rate ◽  
Trade Deficit ◽  
Real Effective Exchange Rate ◽  
The United Kingdom ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate ◽  
The Impact

The major purpose of this study is to determine the long-run and short-run determinants of the trade deficit in the United Kingdom (UK). The autoregressive distributive lagged (ARDL) approach has been employed for estimation purposes in this study. The study finds that there is negative and significant relationship exists between the real effective exchange rate (REER) and the export to import ratio in the long run. The empirical results reveal that a one percent increase in REER causes a decrease in the export to import ratio by 0.37%, while a positive relationship is observed between REER and the export to import ratio in the short run. The impact of gross fixed capital formation on the export to import ratio is statistically significant and negative in the long run as well as in the short run. The value is negative and statistically significant which validates convergence towards the equilibrium both in the case of UK exports to high-income and low-income trading partners (LITPs). The study suggests that real exchange rate and investment are major determinants for trade balance in the case of the United Kingdom and need proper attention.

scholarly journals The Effect of Depreciation of the Exchange Rate on the Trade Balance of Albania

2017 ◽  
Vol 17 (2) ◽  
pp. 141-158 ◽  
Author(s):  
Safet Kurtović
Keyword(s):  
Exchange Rate ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Bounds Testing ◽  
The Real ◽  
Economies In Transition ◽  
Long Run ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
Exchange Rate Depreciation

AbstractAlmost all countries face the problems of trade balance, although they are more inherent in developing countries and economies in transition. A majority of economists adheres to a common opinion real depreciation may lead to an improvement of the trade balance. That said, countries encountering trade balance issues use real exchange rate depreciation in order to improve the trade balance situation. Albania belongs to the group of transition countries that has been facing negative trade balance over last two decades. National currency devaluations of the lek (ALL) have been used by Albania to improve its trade balance. Therefore, this paper intends to investigate the effect of the real effective exchange rate depreciation of the ALL on the trade balance of Albania using quarterly data from 1994 to 2015. Bounds testing cointegration approach, vector error correction model (VECM) and impulse response were used for empirical analysis. The results of the study show that there exists a long-term cointegration between the real effective exchange rate depreciation and the trade balance. Specifically, real effective exchange rate depreciation positively affects the trade balance of Albania in both the long-run and short-run indicating the weak presence of the J-curve effect. Important recommendations were derived from the results.

Does Trade Liberalization Improve Trade Balance in Pakistan?

2017 ◽  
Vol 18 (2) ◽  
pp. 158-183
Author(s):  
Muhammad Arshad Khan ◽  
Atif Ali Jaffri ◽  
Faisal Abbas ◽  
Azad Haider
Keyword(s):  
Trade Liberalization ◽  
Trade Balance ◽  
Negative Association ◽  
Balance Of Payments ◽  
Real Effective Exchange Rate ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate ◽  
The Impact

This article examines the impact of trade liberalization, that is, reduction of tariff and non-tariff barriers on trade balance, in Pakistan over the period 1982–2013. The results reveal that reduction of average effective tariff rate improves trade balance in the short run, while lowering of non-tariff barriers deteriorates trade balance in the long run as well as in the short run. The analysis also suggests that depreciation of real effective exchange rate and foreign income causes an improvement in the trade balance, whereas domestic income deteriorates it. The negative association between the reduction in non-tariff barriers and trade balance worsens sustainability of current account of the balance of payments in Pakistan.

scholarly journals Real Effective Exchange Rate: A Transmission Channel for the Impact of Economic Growth on Exports in Vietnam

2016 ◽  
Vol 23 (01) ◽  
pp. 121-136
Author(s):  
Hiep Nguyen Quang ◽  
Nha Nguyen Thi
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Positive Impact ◽  
Real Effective Exchange Rate ◽  
Var Model ◽  
Transmission Channel ◽  
Effective Exchange ◽  
Effective Exchange Rate ◽  
The Impact

This article analyzes the role of real effective exchange rate as a transmission channel for the impact of economic growth on Vietnam’s exports. Using quarterly data for the period of 1994–2013, the analysis results show that economic growth, real effective exchange rate (REER), and exports tend to fluctuate in the same direction. Furthermore, according to the results of the VAR model, economic growth impacts on and promotes export growth through increased productivity that improves the competitive advantage of products. The exchange rate, as an important channel, allows for a positive impact of economic growth on exports in Vietnam.

Determinants Of The Trade Balance In The Turkish Economy

2017 ◽  
Vol 1 (2) ◽  
pp. 160
Author(s):  
Ali Ari ◽  
Raif Cergibozan
Keyword(s):  
Exchange Rate ◽  
Impulse Response ◽  
Trade Balance ◽  
Real Effective Exchange Rate ◽  
Response Analysis ◽  
Impulse Response Analysis ◽  
Long Run ◽  
Turkish Economy ◽  
Effective Exchange ◽  
Effective Exchange Rate

<p class="AbstractText">The Turkish economy has a long-run problem of trade deficits. Several efforts and different policies over the last 50 years could not find any permanent remedy to this problem which is an important source of external vulnerability for the Turkish economy. Thus, this study aims to shed light on the trade balance dynamics in Turkey via Johansen cointegration test, vector error correction model, and impulse-response analysis, for the period 1987–2015. Estimation results indicate that in the long-run an increase in real effective exchange rate improves trade balance, while an increase in Turkish (foreign) income improves (deteriorates) trade balance. In the short-run, real effective exchange rate has no impact on trade balance, while an increase in domestic and foreign income negatively affects the Turkish trade balance. The impulse-response analysis also shows that the J-curve hypothesis does not hold for the Turkish case. </p>

Remittances and Real Effective Exchange Rate

2018 ◽  
Vol 19 (1) ◽  
pp. 124-136 ◽  
Author(s):  
Ujjal Protim Dutta ◽  
Partha Pratim Sengupta
Keyword(s):  
Exchange Rate ◽  
Real Effective Exchange Rate ◽  
Annual Data ◽  
Long Run ◽  
Effective Exchange ◽  
Short Run ◽  
Effective Exchange Rate ◽  
The Impact ◽  
Bound Test ◽  
Ardl Bound Test

Remittances in India have been growing rapidly since 1991. Most of the studies find that remittance has had a significant impact on real effective exchange rate (REER). It is imperative to evaluate the impact of a transfer such as remittance and aid on country’s competitiveness. This article is an attempt to investigate the impact of workers’ remittances and some selected macro-variables on REER of India using annual data from 1980–2015. The study conducted autoregressive distributive lag (ARDL) bound test co-integration approach to explore this long-run relationship. The ARDL bound test approach confirms significant long-run relationships among the selected variables at 1 per cent level of significance. In addition to this, the ARDL short-run error correction model implies that while REER may temporarily deviate from its long-run equilibrium, the deviations adjust towards the equilibrium level in the long run. JEL: F31, F35, F41

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