How are Relationships between Export, Inflation, and Exchange Rate? The Case of Pangasius in Vietnam

Abstract

Vector Autogressive Model (VAR), variance decomposition, and impulse response function are used, with three variables under consideration: the exchange rate between VND and USD, the export value of pangasius, and the inflation rate of Vietnam. The data used are monthly time series covering the period from January 1999 to December 2012. Our analysis shows that there is a long-run cointegration relationship between the exchange rate, the export value of pangasius, and the inflation rate. The results also show that the export value of Vietnamese pangasius is a main determination to explain the exchange rate. We could not find evidence of response of the exchange rate to the inflation, but the inflation rate reacts positively and significantly to one standard deviation shock in the exchange rate and the export value. In sum, our results contribute to the debate about choice of exchange rate regime for Vietnam to maintain the upward trend of pangasius export and of strategy to face the inflation situation. To prevent a currency and balance of payments crisis, the government can take a tough tightening stance. This could dampen growth in the near future, but the benefits outweigh the downside, as it would take an extended period for an economy to recover from a major shock.http://jabes.ueh.edu.vn/Home/SearchArticle?article_Id=d9af3d14-4403-4fb2-bb4a-1aede075d4ff