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Keywords = triple regime-switching model

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11 pages, 1089 KiB  
Article
What Does Vietnam Gain When Its Currency Depreciates?
by Nguyen Thi Thanh Binh
Economies 2021, 9(4), 185; https://doi.org/10.3390/economies9040185 - 19 Nov 2021
Viewed by 10965
Abstract
The study investigates how the depreciation of the Vietnam dong (VND) against the US dollar (USD) affected export turnover and the stock market in Vietnam during the period from 2000 to 2020. A Markov triple regime-switching model is developed for time-series data involving [...] Read more.
The study investigates how the depreciation of the Vietnam dong (VND) against the US dollar (USD) affected export turnover and the stock market in Vietnam during the period from 2000 to 2020. A Markov triple regime-switching model is developed for time-series data involving multistructural breaks. Empirical results reveal that the impact of exchange rates on export turnover and stock price existed both in the long and short run. In the short run, the depreciation of VND led to (i) an increase in export turnover after 12 months; (ii) a decrease in export turnover of the high-growing regime in the short term; (iii) a reduction in stock returns in most cases. In addition, the common cycle from order receipt, preparation, production, and export is about 12 months for all states. The high volatility of export turnover was associated with high export growth. The commonly used phrase of “high risk, high return” seems to not be true for Vietnam’s stock market. The results of this study suggest the feasibility of a slight appreciation of VND against USD, which is the key to escape from being labeled a currency manipulator by the US Treasury. Full article
(This article belongs to the Special Issue International Financial Markets and Monetary Policy)
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