The effects of world crude oil price on the real effective exchange rate: empirical evidences from Vietnam
The effects of world crude oil price on the real effective exchange rate: empirical evidences from Vietnam

Summary/Abstract: The paper examines impact the world crude oil price (WCOP) on the real effective exchange rates (REER) based on empirical evidences from Vietnam in the period from 1986 to 2019. It includes five parts. Section 1 introduces research issues. Section 2 presents an overview of the research on the relationship between the WCOP and the REER. Section 3 describes the data and research methods. In Section 4, we use the autoregressive distributed lag model (ARDLM) to study the impact of the WCOP on the REER of Vietnam. Section 5 presents the key findings and explains the results in the light of actual practices. Monthly data are divided into four periods: Dec 1986 - Dec 1990, Jan 1991 - Jan 1999, Feb 1999 - Dec 2015, and 2016 - 2Q 2019, corresponding to the principles of the monetary policy in Vietnam. The obtained results basing on the ARDLM show that there was no impact of the WCOP on the REER in the period between Dec 1986 and Dec 1990. In the remaining two periods, the impact of the WCOP on the REER was observed in the short-term. The last period between 2016 and 2Q 2019 shows that the WCOP has a strong impact on the actual average exchange rate in Vietnam. In some way, this is also a positive expression of the close relationship between the foreign exchange market and the WCOP. In all the periods, there exists a co-integration relationship between the WCOP and the REER.

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