The Effects of Exchange Rate, Labor Skill and Product Quality on Vietnam’s Trade: An Industry Level Analysis
- Abstract
- This thesis scrutinizes three issues. Firstly, it explores the effect of fluctuations in the exchange rate of Vietnamese Dong (VND) and the composition of labor skill on Vietnam’s trade balance with selected trading partners, over the period 2001 to 2016. Our results indicate statistically significant effect of the depreciation of VND on promoting Vietnam’s trade balance. However, the effect is not obvious. We also find out that the depreciation of the VND worsens the trade deficit of the high labor-skill produced commodities, and medium-skill white collar labor-produced commodities. We further prove that climbing up the labor skill ladder and facilitating the none-price competitiveness of the high labor-skill produced commodities and medium-skill white-collar labor-produced commodities can have a positive impact Vietnam's total trade balance. Nevertheless, boosting the low-skill labor-produced commodities and medium-skill blue collar-labor produced commodities can hardly contribute to Vietnam's total trade balance.
Secondly, the thesis empirically investigates the impacts of the intra-industry trade and products quality on the exchange rate pass-through (ERPT) into Vietnam’s import prices from China, using annual data from 2001 to 2016. The weighted GL index reveals a deepening degree of intra-industry trade between Vietnam and China. We also detect that the quality of goods which Vietnam export to China is generally lower than the quality of goods China export to Vietnam, based on the results of Kernel density estimations. The regression results based on fixed effect model suggest that the increase of intra-industry trade between Vietnam and China reduces the effect of exchange rate on Vietnam’s import prices from China. Moreover, the goods quality has a significant impact on the ERPT in Vietnam’s import prices from China. More specifically, the lower quality commodities of Vietnam in relative to China have higher ERPT effects into the import prices than the higher quality commodities. In addition, no significant impact of the horizontal intra-industry trade on the ERPT can be documented.
Thirdly, the thesis examines the asymmetric effects of exchange rate movements on Vietnam’s import prices from China. Specifically, the experiments are conducted at an industry level by using the Non-Linear Auto Regressive Distributed Lags (ARDL) model. The sample data is monthly covering from July 2011 to December 2017. We find that the ERPT into import prices are heterogeneous across industries. The asymmetric ERPT effects are detected in many industries. The import prices of 35 industries react more sensitively to the appreciation of VND against Chinese Ren Min Bi (RMB), while the prices of other 22 are more sensitive to the depreciation of VND.
- Issued Date
- 2019
- Awarded Date
- 2019. 8
- Type
- Dissertation
- Publisher
- 부경대학교
- Affiliation
- Pukyong National Univerisity Graduate School
- Department
- 대학원 국제지역학과
- Advisor
- Utai Uprasen
- Table Of Contents
- 1 Introduction 1
1.1 Background and Motivations 1
1.2 Objectives and Contributions 4
1.2.1 Objectives 4
1.2.2 Contributions 6
1.3 Methodology 7
1.4 Summary of The Findings 8
1.5 Structure of The Thesis 12
2 Vietnam’s Trade and Exchange Rate Regime 13
2.1 The Evolution of Vietnam’s Trade 13
2.1.1 Vietnam’s Main Trade Partners 13
2.1.2 Vietnam’s Merchandise Trade 19
2.2 The Evolution of Vietnam's Exchange Rate Regime 20
3 The Roles of the Exchange Rate and Labor Skill on Vietnam’s Trade Balance: An Industry Level Analysis 23
3.1 Introduction 23
3.2 Literature Review 26
3.3 The Trade Patterns between Vietnam and Main Trade Partners 31
3.3.1 Vietnam’s Trade Patterns with Top 20 Trading Partners 31
3.3.2 Vietnam's Trade Balance and Exchange Rate 34
3.4 Theoretical Framework 38
3.4.1 The Impossible Trinity 38
3.4.2 The Marshall-Lerners Condition 40
3.4.3 The Trade Balance and “J” Curve 51
3.5 Model Specification and Data 55
3.5.1 Labor Skill Composition of Merchandise Trade 55
3.5.2 RCA (Revealed Comparative Advantage) 62
3.5.3 The Determinants of Vietnam’s Trade Balance: A Gravity Model Approach 69
3.5.4 Data 79
3.6 Estimation Results And Discussions 80
3.6.1 The Role of Exchange Rate on Vietnam’s Trade Balance 80
3.6.2 The Role of Labor Skill Composition on Vietnam’s Trade Balance 88
3.6.3 The Role of RCA on Vietnam's Trade Balance 92
3.7 Conclusion 96
4 The Heterogenous Exchange Rate Pass-Through into Vietnam’s Import Prices from China 99
4.1 Introduction 99
4.2 Literature Review 101
4.2.1 Literature Review on The Exchange Rate Pass-Through 101
4.2.2 Literature Review on The Heterogenous Exchange Rate Pass-Through 105
4.2.3 Literature Review on The Case of Vietnam 107
4.3 Theoretical Framework 109
4.4 Methodology and Data 114
4.4.1 Intra And Inter-Industry Trade 114
4.4.2 Vertical And Horizontal Intra Industry Trade 115
4.4.3 Empirical Model Specification 117
4.4.4 Variable and Data 120
4.5 Estimation Results 123
4.5.1 GL Index of Vietnam Vis-À-Vis China 123
4.5.2 Vietnam’s Goods Quality 128
4.5.3 The Composition of Vietnam’s Intra-Industry Trade Vis-À-Vis China 135
4.5.4 The Heterogenous Exchange Rate Pass-Through into Vietnam’s Import Prices from China 137
4.6 Conclusion 141
5 Asymmetric Exchange Rate Pass-Through into Vietnam’s Import Prices from China: An Industry Level Analysis 145
5.1 Introduction 145
5.2 Literature Review 147
5.3 Model Specification Aand Data 151
5.3.1 The ARDL Model 151
5.3.2 The Non-Linear ARDL Model 155
5.3.3 Variable and Data 159
5.4 Estimation Results and Discussion 161
5.4.1 Unit Root Test 161
5.4.2 The Model Selection and Diagnostic Test 164
5.4.3 The Long Run Coefficients 165
5.4.4 The Dynamic Multipliers 167
5.5 Conclusion 266
6 Conclusion 270
6.1 Findings and Policy Implications 270
6.2 Limitations and Further Research 276
References 278
Appendix 291
- Degree
- Doctor
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