Exchange Rate Volatility and Disaggregated Manufacturing Exports: Evidence from an Emerging Country

摘要

The link between export performance and exchange rate policy has been attracting attentionfrom policymakers, academics, and practitioners for some time, particularly for emerging countries.It has been recently claimed that implementing a policy that devalues the currency in Vietnam isan important factor for enhancing its export performance. However, it is also argued that such apolicy could result in the harmful consequence of exchange rate volatility. This study analyzes thelink between exchange rate devaluation, volatility, and export performance. The analysis focuseson the manufacturing sector and 10 of its subsectors that were engaged in the export of goodsbetween Vietnam and 26 key export partners during the 2000–2015 period. Potential factors thatcould affect this relationship, such as the global financial crisis, Vietnam’s participation in the WorldTrade Organization, or even the export partners’ geographic structures, are also accounted for inthe model. The findings confirm that a strategy that depreciates Vietnam’s currency appears toenhance manufacturing exports in the short run, whereas the resulting exchange rate volatility hasclear negative effects in the long run. The impact of exchange rate volatility on manufacturingsubsectors depends on two factors, namely, (i) the type of export and (ii) the export destination. Policyimplications emerging from these conclusions are presented.