Authors : Nguyen Cam Nhung and Tran Thi Thanh Huyen
Abstract: This study analyzes the Exchange Rate Pass-Through (ERPT) into the prices of Vietnam’s major import commodities in 5 industries including electric machinery; machinery and mechanical appliances; iron and steel; plastics; transport equipment. The monthly data from Jan 2007-Dec 2015 is used in the fixed effect model regression at the HS-6 digit level (or 9 digit level) and is aggregated into the HS-4 digit level. By comparing the behaviors of 7 major trading partners, namely China, Japan, EU-28, Republic of Korea, Singapore, Thailand and Taiwan, the results reveal that the degree of ERPT into each selected HS 4-digit-level commodity is different among partners. Not only the US dollar but also other currencies such as JPY, CNY, SGD and EUR are proved to be invoicing currencies. Therefore, besides implementing methods to prevent exchange rate risks for VND/USD, Vietnamese importers should also take care of the movement of the exchange rate of VND/SGD, VND/CNY, VND/JPY and VND/EUR. This evidence may have important implications for exchange rate policy makers of Vietnam. According to results drawn from trade statistics, VND should be pegged to a currency basket including USD, JPY, CNY, SGD and EUR.
Nguyen Cam Nhung and Tran Thi Thanh Huyen, 2017. Exchange Rate Pass-Through into Vietnamese Import Prices by Industries and by Countries. International Business Management, 11: 1834-1843.