exchange rate report - v2

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Exchange Rate in Viet Nam during 2000-2011:

Determination, Misalignment, Impact on Exports

and Policy Dimensions1

Vu Quoc Huy

Vu Pham Hai Dang

and

Nguyen Thi Thu Hang2

First Draft

July 2011

1 This study is commissioned by Economic Commission of National Assembly and UNDP in Viet Nam. Theauthors would like to thank Vu Viet Ngoan, Nguyen Tri Dung, Nguyen Duc Hoa, To Trung Thanh, RodneySmidth, and Vu Lan Anh for their ideas, advice and support. The views expressed and the errors remaining,however, are the authors’ sole responsibility.2Faculty of Development Economics, University of Economics and Business, Viet Nam National University.

DRAFT ONLY, NOT FOR QUOTATION



Contents

Introduction ............................................................................................................................... 4 Exchange rate management in Viet Nam: Recent policy developments ................................ 6

Recent Developments ....................................................................................................................... 8 Real exchange rate development ....................................................................... ............................ 15

Real (Effective) Exchange rate determination and misalignment ........................................ 20 Real Effective Exchange Rate (REER): Concept, Measurement and Application ................... 20

Measuring Real Effective Exchange Rate in Viet Nam: New data and findings. ......................................... 22 Main results and optimal choice of country coverage and data frequency. ................................................. 23

Real EffectiveExchange Rate Determination and Misalignment ..................................... .......... 25 Measuring the Equilibrium Exchange Rate ........................................................................... ........................ 25 Model specification: A literature survey .............................................. ......................................................... 29 Model selection and empirical implementation for Viet Nam....................................................................... 31

Concluding remark .......................................... ........................................... .................................... 35 The effects of exchange rate on trade balance: An econometric assessment ....................... 36

Model specification ........................................................................................................................................ 36 Data ................................................................................................................................................................ 38 Main findings and implications......................................................................................... ............................. 39 Concluding remark ......................................................................................................................................... 43

Towards an flexible and effective ER management mechanism: Public Policy Dimension

of ER management.................................................................................................................. 44 ER Management and Policy Objectives ................................................ ....................................... 44

Conclusion and Policy Implications ...................................................................................... 50 References ............................................................................................................................... 51 Appendices ............................................................................................................................... 52



List of tables

Table 1. Real ER indices of selected currencies against USD (base year = 2000) .................. 16 Table 2: Single country Long-Term REER estimation: Summary of Results for (Los IncomeCountries (LICs) and Emerging Market Economies (EMEs) .................................................. 30 Table 3: Unrestricted Co-integration Rank Tests: ................................................................... 32 Table 4: Summary of regression results for four AR options .................................................. 33 Table 5: Export coverage of pairwise Grange Causality Tests between Exchange Rate andExports ..................................................................................................................................... 39 Table 7: Export values affected by a exchange shock in two periods: 2 and 4 ....................... 42 Table 8: : Export values affected by a exchange shock in two periods: 6 and 8 ..................... 43 Table A 1. Viet Nam’s ER Arrangements, 1989-2011 ............................................................ 52 Table A 2: Viet Nam destinations of exports2005-2010 ......................................................... 57 Table A 6. Co-intergation coeffients by sub-sectors ............................................................... 67 Table A 7: Short-term responses of export to exchange rate: .................................................. 75

List of Figures

Figure 1.Viet Nam’s Nominal exchange rateVND/USD (LHS) andinflation rate (RHS), 1992-2010............................................................................................................................................ 7 Figure 2 Daily VND/USD ER and bands, 2008-2011 ............................................................... 9 Figure 3. Daily Official and ParallelMarket ER, VND/USD, 2009-2011 ............................... 10 Figure 4.Quartly Real ER and nominal ER VND/USD 2000-2010 (baseperiod = 2000Q1) .. 15 Figure 5: Quarterly real exchange rate index for selected currencies against USD (2000Q1-2010Q3 (base period: 2001Q1 ................................................................................................. 18 Figure 6: Real exchange rate volatility: Quarterly Coefficient of Variation for selectedcurrencies (2001Q1-2010Q3) .................................................................................................. 18 Figure 7: Real exchange rate volatility: Annual Coefficient of Variation for selectedcurrencies (2001Q1-2010Q3) .................................................................................................. 19 Figure 9: Nominal, RER, REER and Export Growth Index .................................................... 24 Figure 10: REER with different country samples .................................................................... 24 . Figure 11: Equilibrium Exchange Rate.................................................................................. 34 Figure 12: Exchange Rate Misalignment: Total and Current .................................................. 35 Figure 13: Short-term responses of exports to a exchange rate shock : Transitional impulseresponses .................................................................................................................................. 41



Introduction

Macroeconomic instability in Viet Nam continued to accumulate during the past few

years and shows worsening signs during the early months of 2011. Budget deficits and trade

deficits have become chronic problems and continued to worsen. Exchange rate management

also faced with various challenges including continuous distortions in the foreign exchange

markets. The situation has been fueled by the return of inflation since September 2010 which

still continues at present (May 2011). These are the four most pressing issues affecting

macroeconomic stability in Viet Nam at the moment.

International experience shows there is no ready recipe as to how a country should

manage its exchange rate. Hernandez and Montiel (2001), for example pointed out that

except for a few cases, most countries build their exchange rate regime along a continuum

between two extreme cases of exchange rate arrangements: bilateral pegs with very narrow

bands, on the one hand and clean floats on the other hand. Furthermore, there are significant

gaps between dejure,what is officially stated and de facto,what is actually conducted in

practice exchange rate policies in many countries. Assessing an exchange rate regime is

therefore an empirical issue.

Apart from the acknowledged gap between de jure and de facto exchange rate policies

in a country, there is also a serious mismatch between expected results of exchange rate

policies and the real impact on the economy that an change in exchange rate policies may

have, as well as the trade-off between these stated objectives. Often, the exchange rate

policies have been given too many usually competing objectives with a few instruments and

policy spaces to implement. Exports may increase and trade balance may be improved due to

a currency devaluation, but this hold under certain conditions (Marshall-Lerner condition, for

example is just one to mention) and the magnitude of impact varies significantly across

sectors and time. Furthermore, there is a conflict between the objectives of stabilizing

consumption based real exchange rates and allowing terms of trade adjustment for an floating

exchange rate regime (Devereux and Engel, 2006). On the other hand, exchange rate can affect

inflation in many ways. As Svensson (1998) agues in an open economy, the real exchange

rate affects the relative price between domestic and foreign goods, which in turn affects both

domestic and foreign demand for domestically produced goods, and hence affects aggregate

demand and inflation. There is also a direct channel, in that the exchange rate affects

domestic currency prices of imported foreign goods, which enter the consumer price index.



The implication is that any scheme to control the rate of inflation on the short horizon must

control, to some extent, the behavior of the nominal exchange rate. Gains for exports from a

devaluation in the first-round effect may be offset by the inflationary impact of this

devaluation in subsequent periods. The magnitude of this combined impact again tend to be

sector- and time-specific due to the nature of exchange rate pass-through and other

transmission channels (Devereux and Engel, 2006). Using real effective exchange rate by itself

as a measure of competitiveness maybe misleading because competitiveness itself is a much

broader concept (Bella, Lewis, and Martin, 2007)

The complexity of conducting exchange rate policy, its multi-facet impact and trade-off

helps explain why the issue has received much of attention and debates in recent years in Viet

Nam, especially since 2007 when the country faces serious macroeconomic turbulences.

Tough measures including ban of foreign exchange trading in the parallel market, imposing

quasi foreign exchange surrender requirement and delayed but then strong devaluation of the

currency in 2011 have raised concerns on the effectiveness and appropriateness of the

exchange rate policy in this period. This study attempts to shed light on some of issues

surrounding the exchange rate management in Viet Nam in recent year on an empirical basis.

We calculate the monthly real effective exchange rate (REER) using up-to-date, high-

frequency and of better coverage data addressing some of problems faced by previous

calculations by various authors. We recommend an ‘optimal’ frequency and coverage for

calculating REER in the future for policy monitoring and reporting purposes. For the first

time in Viet Nam, a degree of exchange rate misalignment has been determined, using a

simple but quite effective and widely used econometric model. This information on exchange

rate misalignments help make assessment on the effectiveness of exchange rate policy,

providing a better information of the direction of exchange rate movements vis-à-vis the

fundamentals of the economy, thus helping policy makers to ponder different options of

changes for exchange rate policy and make adjustments accordingly. Finally, a quantitative

method to study the effects of the exchange rate on exports is applied for nearly 200 sub-

sectors in 3-digit SITC classification to gain better understand of dynamic impact of

devaluation on exports. This model confirms the previously mentioned hypothesis that

devaluation affects exports differently across sectors and time.

This paper is organized as follows: Section I summaries the recent changes in the foreign

exchange market and relevant policy developments with emphasis on the post-2007 period.

Section II deals with real effective exchange rate (REER) estimation. Section III on



determining the exchange rate misalignment and Section IV on the econometric model on

impact of exchange rate on exports. Section V is on the public policy dimension of exchange

rate management in Viet Nam and opens up directions for further studies.

Exchange rate management in Viet Nam: Recent policy

developments

Managing the exchange rate (ER) to help control inflation, stabilize the economy and

pr0mote export and improve trade balance has always been de jure an important task for Viet

Nam. This is even more significant at present when Viet Nam is still trying to recover from

the global economic crisis of 2007-2009 and struggling against macroeconomic instabilities.

Viet Nam has had many adjustments in ER regime since the end of the centrally planned

period in 1989. However, most of the adjustments in essence are along a fixed regime. In

Viet Nam, ER is anchored against the USD. State Bank of Viet Nam (SBV) declares the

official bilateral VND/USD rate . Based on the exchange rates between the USD and other

currencies, commercial banks establish the exchange rates between VND and those

currencies. (See Table A.1. in the Appendices for detailed information on the adjustments

since 1989 in Viet Nam)

During the past 10 years, a lot of efforts have been made in studying Viet Nam’s ER

regime. Representatives for those are studies by Vo Tri Thanh et al. (2000), Ohno (2003),

Nguyen Tran Phuc and Nguyen Duc Tho (2009), and Nguyen Tran Phuc (2009). These

studies indicated that Viet Nam’s ER regime on the one hand needs to be stabilized but it also

needs to respond to market conditions,on the other hand. Vo Tri Thanh et al. (2000) proposed

Viet Nam to follow a band-basket-crawling arrangement while Ohno (2003) suggested Viet

Nam to apply a crawling peg regime. In recent years, Viet Nam has pursued a crawling peg

regime similar to those proposed by these two studies. However, more recent studied by

Nguyen Tran Phuc and Nguyen Duc Tho (2009), and Nguyen Tran Phuc (2009) argued that

this crawling peg arrangement is not efficient, creating instabilities in the financial market.

Moreover, it also hinders the development of Viet Nam foreign exchange market. Nguyen

Thi Thu Hang et al. (2010) shared the view of Nguyen Tran Phuc (2009) and suggested Viet

Nam to quickly move to a managed float regime.



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periods where parallel market rates were closed to official rates. The reason for this is that

official rates had been increasing continuously during the volatile period and matched with

parallel market rate at the end of such period.

During the beginning of the 1990s, and after witnessing the terrible economic impacts

skyrocketing inflation, Viet Nam had tried to control inflation to stabilize macroeconomic

conditions and to restore public trust in VND. During this period, a rather fixed ER

arrangement as had been used in practice were appropriate. Inflation had been controlled

effectively during 1992-1996.

However, this success had not been repeated in later periods. During the Asian financial

crisis and the recovery year (1997-2003), VND had been continuously devaluated. Yet high

inflation (around 10%) was not persistent and this period even ended in a deflation sub-period

of 2000-2001. Also, the application of relatively rigid ER arrangements from 2004 to 2008did not help to achieve inflation control. Inflation rate increased over the years and the period

ended with high inflation (20% in 2008).We will discuss in more details the reasons for the

differences in the effects of the same ER arrangements later.

Recent Developments

The 2008-2009 period

The 2008-2009 period marks some major changes in policy response in Viet Nam

regarding ER management. Since 2007, due a massive increase of foreign indirect investmentinflows, USD supply increased greatly. In fact, during the first half of 2007 and from October

2007 to March 2008, Viet Nam’s foreign exchange markets witnessed a surplus of USD

which dragged commercial bank ER5 down to the lower band. VND, in effect, appreciated

during these periods.

Figure 2 shows that the official ER had major changes in 2008 due to high inflation and

the initial impacts of the global economic crisis on Viet Nam’s economy. Also from mid-

2008, together with economic recession, foreign indirect investment also started to reverse

with increasing net outflows.

The year 2009 witnessed extensive fluctuations both in the foreign exchange market of

Viet Nam and in policy responses by the Vietnamese government. Relative movements of

strong currencies under the influence of the global economic crisis have had considerable

5Commercial bank ERs are rated quoted at commercial banks and have to be within SBV’s set band.



impacts on Viet Nam’s balance of payments as well as its macroeconomic policies especially

those concerning economic growth and inflation control. Domestically, the continuous

depreciation of Viet Nam dong (VND) and changes in exchange rate management policies

created doubts in the public regarding the trustworthiness of the dong and the credibility of

policy. These challenges led to the need for a reconsideration of current ER management

policy and for an examination of the conditions for moving on to another ER regime.

The major trend for official ER in 2009 is the nominal depreciation of VND against

USD. By the end of 2009, the official VND/USD rate had increased by 5.6% compared to

that at the end of 2008. While during 2008, commercial bank rates were very volatile,

sometime even lower than the official rates (such as at the beginning of the year), during

2009 commercial bank rates were virtually always match with the upper band set by SBV.

Figure 2 Daily VND/USD ER and bands, 2008-2011

Source: SBV, Vietcombank(2011) and authors’ calculation

For most of the year 2009, pressures from foreign exchange supply and demand as wellas from speculation pushed up the parallel market rate far away from the OER. Despite the

fact that in March SBV tried to widen ER band around the OER from +/-3% to +/-5% – the

widest band ever been used over the past decade, commercial banks continued to quote at the

upper band level. Current account deficit had been in trouble some position for sometimes

and continued to get worse from March 2009. Import value during the last quarter of the year

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increased greatly compared to the first quarter, taking around 30% total import value of the

whole year. Export value declined 10% compared to that in 2008 mainly due to decline in

world prices of major exports of Viet Nam. Even though export recovered at the end of the

year, trade deficit reached USD2 billion in November, highest monthly level of 2009.

In addition, the big gap between domestic and world gold prices contributed to the ever

increasing demand for USD due to businesses wanted to import gold to take advantages of

the gap. Both gold price and USD price measured in VND increased. Due to speculative and

psychological effects (dollarization) the public also increased their demand for USD in

parallel foreign exchange market forcing parallel market ER to increase greatly. At the same

time, due to limited access to USD supply, businesses had to either pay extra fees to purchase

foreign exchange at commercial banks or turn to parallel market for their needs. Public

doubts about policy credibility increased considerably causing supply to decline and demand

to increase, pushing the parallel rate up even further. Many concerns were raised about

further devaluation of VND, especially after the publication of the reports by financial

institutions.

Figure 3. Daily Official and ParallelMarket ER, VND/USD, 2009-2011

Source: SBV, Vietcombank and private gold stores (2011)

On 26/11/2009, to ease speculative and market pressures, SBV was forced to officially

devaluate VND by 5.4%, the highest daily devaluation rate since 19986 and narrow the ER

6At the end of December 2008, SBV devaluated VND by 3%.

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band to +/-3%. Together with these changes, SBV also increase its benchmark interest rate

from 7% to 8%/year. These policy responses were considered to be appropriate but rather

late. VND continued to lose value which was evident in the high parallel market rate at

19,400 VND per USD and commercial banks continued to quote at upper band level at the

end of 2009.

The above situation could have been worse without the followings: (i) the reduction in

foreign exchange demand due to the decline in remittance outflows from foreign-invested

enterprises (estimated at USD3 billion in 2009, compared to USD4.4 billion in 2008) and (ii)

the increase in foreign exchange supply thanks to the sustained level of remittances from

overseas at more than USD6 billion. Disbursed FDI was estimated at USD10 billion in 2009.

And even though net inflow of foreign indirect investment was negative during the first half

of the year, the flows reversed at the end of the year.

The above analysis shows that during this sub-period, SBV had been hesitant and

inconsistent in making ER policy. The widening of bands instead of official devaluation in

March 2009 did not bring the expected results. During the whole year, despite administrative

measures (such as the regulation that requires all state-owned enterprises to sell foreign

exchange to SBV) as well as various statements by SBV officials, parallel market rates

continued to stay at levels higher than commercial bank rates. In addition, trying to maintain

the OER for prolonged period, SBV had to sell a considerable amount of USD, in effect

reducing Viet Nam’s foreign reserves. By the end of 2009, there was still considerableexpectation about further depreciation of VND.

The 2010-2011 period

The year 2010 continued with the same trends in the foreign exchange market as in the

year 2009. In particular, commercial banks continued to quote at the upper band of the

official ER for most of the year and the gap between parallel market rate and official rate rose

to unprecedentedly high levels near the end of 2010.

As the pressures were still high despite various attempts by SBV at the end of 2009, on11/02/2010, SBV increased the official rate from 17,941 VND/USD to 18544 VND/USD, a

3.3% devaluation. Together with this, SBV carried out various administrative measures to

ease the pressure in the foreign exchange market such as reducing the required reserve ratio

for foreign currency deposits, expanding credit in foreign currencies, stopping gold trading

using foreign accounts by commercial banks and credit institutions, closed down gold trading



floors, and increased the basic interest rate to 8%. As a result, foreign currency credit growth

reached 27% during the first half of 2010 while domestic credit in VND grew only by 4.6%.

At the same time, the amount of foreign transfers by Vietnamese overseas and the amount of

FDI, ODA and FII disbursements both increased during the first two quarters of 2010 as

compared to the same period of 2009 under the economic crisis. All of these factors

contributed to both the increase in supply and the reductionin demand for dollars, thus

reducing the gap between the official rate and the parallel market rate during the second

quarter and the first half of the third quarter of 2010 (see figure 3).

However, despite this, commercial banks continued to quote at or near the upper band of

the official ER. And from the beginning of July 2010, parallel market rate started to climb

though slowly at first. These trends reflect the expectations for further devaluation of VND in

the foreign exchange market. The reasons for such expectation include (i) the ease in supply

of dollar was mainly due to businesses taking advantage of the difference in interest rates

between foreign currency denominated deposits and VND deposits; (2) many administrative

measures by SBV are temporary and expected to be reversed; (3) fear of increased demand

for foreign currencies as many of the debts in foreign currency taken out by businesses to

take advantage of interest rate differences would soon be due; and (4) speculative behaviors

by the public for trust in VND was waning.

Perhaps realizing these potential threats, on 17/08/2010, SBV unexpectedly increase the

official ER by 2.1% to 18,932 VND/USD even when the pressures were not apparent and thegap between parallel market rate and the official rate had been staying at low level of around

500 VND/USD. Immediately, commercial banks raised their rate to the upper limit. SBV

action might have been able to relieve the pressures and stabilize the exchange rate if it was

not for many unfavorable factors that occurred during the last months of 2010. The first and

perhaps most important factor was the rise in world gold price to record high level which led

even to higher increase in domestic gold price due to speculation.At the same time, after

several months of low inflation rate, inflation started to climb since September 2010 making

the CPI for the year 2010 increase to 11.75% compared to 7% in 2009.

During the past few months of 2010, the foreign exchange market saw an increasing in

demand for foreign currencies due to (i) the increased need for paying up debts taken by

businesses during the first and second quarters of 2010, (ii) increase demand for import as it

often does at the end of the year and also for gold import to take advantage of the difference

between domestic and world gold prices, (iii) the tightening of SBV on foreign currency



credit, (iv) the increase in interest rate of deposits denominated in foreign currency to more

than 5% per annum and (v) speculations. In addition, the supply of foreign currencies was

declining due to businesses’ unwillingness to sell foreign currencies to banks for fear of

further devaluation.

As a result of the excess demand in the foreign exchange market, the parallel market rate

started to climb again since September 2010 to 20,500 VND/USD in mid-October and to a

record high level of above 21,500 VND/USD by late November (see figure 3). Facing with

such crisis, SBV again carried out various administrative measures such as declaring the

increase in the supply of dollars for imports of necessary intermediate goods, tightening the

trading and lending/borrowing in gold, and increasing quota for gold import to ease up

domestic gold price. Also, the basic interest rate was increased to 9% per annum in

November.

Yet, the parallel market rate only eased up a little and stayed high at the end of 2010 and

beginning of 2011. The first reason for this was that most measures by SBV, especially those

applied in domestic gold market were temporary. Secondly, foreign reserves had been

declining continuously since 2009 and thus the guarantee by SBV to supply foreign

currencies to the market was not fully backed. Thirdly, inflation was high and continued to

rise. Fourthly, trade deficits for 2010 were still high at USD12.4 billion (already excluding

USD2.8 billion in gold). This crisis was further fueled by speculative behaviors.

Unable to sustain the exchange rate further, SBV declared an unprecedentedly high rate

of devaluation of VND (9.3%) in early February 2011, increasing the official rate to 20,693

VND/USD and narrowed the band to +/-1%. This attempt did not show immediate results.

Parallel market jumped to over 22,100 VND/USD within a few days. In March 2011, SBV

tightened the activities in foreign exchange market, setting interest rate ceiling for foreign

currency deposits and thus effectively widening the gap between this rate and the VND

deposit rate which were already at its ceiling level of 14%. Ceiling rate for USD denominated

deposits was reduced from around 5% to 3%. At the same time, from March to June, SBV

carried out various anti-dollarization measures such as lower ceiling rate for USD

denominated deposits (from 3% down to 2%), tightened controls on black market activities

and on domestic gold market. Also as domestic gold price was lower than international price,

gold export increased significantly, especially during May and June. Thus, supply of dollar

increased partly due to the conversion from USD deposits to VND deposits to take advantage

of high VND deposit rate and partly due to the increased amount of USD obtained from gold



export. Also, SBV declared that it had acquired an additional of USD3 billion for foreign

reserves.Effectively, both the parallel market rates and the commercial bank rates went down

and sometimes even lower than the official rates since April 2011.

The sub-period of 2010-2011 show more responsive attempts by the SBV than in

previous years. In particular, the SBV tried to stay ahead of the market in August 2010 when

the pressures in the foreign exchange market were relatively low. Also, the SBV carried out

larger one time devaluation (February 2011). These actions show that the SBV is less rigid

and more oriented toward the market than before. However, the SBV is still using many

administrative measures instead of creating the environment for the market to adjust.

Although the pressures in the foreign exchange market have eased up somewhat, the

lessons from similar situation in mid-2010 warn us not to take the market for granted. There

are undeniable similarities between these two periods of seemingly calm market conditions.First, businesses and individuals have been converting USD deposits to VND deposits to take

advantage of interest rate differences in both periods. Second, in both periods, commercial

banks have been easing up on their ERs, quoting below (though still close to) the upper limit.

Third, foreign currency credits have been expanding much faster than VND credits in both

cases which means end of year demand for foreign currencies to pay back those debts will

certainly increase. Fourth, pressures from trade deficits have been strong. Lastly, parallel

market rates and commercial banks rates stay close together. (Despite the tightened controls

in the black market, certain activities are still going on). Thus, if unfavorable conditionsemerged during the last quarter of 2011 such as sudden and big changes in gold markets (both

domestic and world), high inflation (both international and domestic), pressures in the

exchange rate market will increase and may lead to fluctuations in the market as we

experienced during the last quarter of 2010.

There are, nonetheless, differences in the market conditions in the current period

compared to that of mid-2010. First, the situation was more favorable in 2010 because the

foreign exchange market was calm during a period of low inflation and therefore trust in

VND tends to be high. At present, however trust in VND is running low due to the past 8

consecutive months of high inflation. Nevertheless, SBV has been able to and is still making

more effort to increase foreign reserves using some tough administrative measures such us

crack down the parallel market, imposing quasi-foreign exchange surrender requirements. It

seems that so far SBV was able somehow to stabilize the market. Third, SBV’s last

devaluation in February 2011 (9.3%) was almost twice as high as all two devaluations in the



year of 2010 (5.4%)combined together. That raises some hope that pressures for further

devaluation this year will be less than those in the last year. Yet again, one should take into

account the fact that inflation this year will be considerably higher than that of 2010.

Real exchange rate development

Figure 4.Quartly Real ER and nominal ER VND/USD 2000-2010(baseperiod = 2000Q1)

Source: Authors’ calculation based on SBV’s and IFS’s data (2011)

Figure XX show the patterns of change of both nominal and real exchange rate in the last

decade by quarter. The nominal rate shows a clear depreciation trend throughout the whole

decade and tends to accelerate more so from 2008 until now. The estimated time trend7 of

depreciation was about 0.4 percent in the period 2000-2007 but it reaches 1.8 percent level in

the subsequent period from the early 2008, an increase of nearly fivefold compared to the

previous period. The real ER, however, shows a different pattern of movement. It experiencesa rather modest depreciation in the period of 2000Q1-2003Q3 with the time trend equal to

0.75 percent. The currency, however, shows a strong appreciation trend in the period of

2003Q4-2008Q4 with an appreciation speed of around 1.5 percent quarterly (Figure xx). The

7 The time trend is the coefficient of time variable in the following simple regression y= c+ a*time +( b*X)



gap between nominal and real ER has been widening especially during 2008-2010 due to

high inflation that the country experienced in this period. Viet Nam’s consumer price index

(CPI) increased by 123% during the period from 2000 to 2010, while the index for the US

increased by only 26.7% over the same period. The nominal VND/USD rate increased only

30.4% over the period. Thus, in effect, the currency appreciated 25.9% in real term during

this period. A strong nominal depreciation of 9.3% recent in February 2011doesn’t

seemtoturn this appreciation trend since annual inflation hits a high level of 13.54% again in

the first 6 months of 2011.

Table 1. Real ER indices of selected currencies against USD(base year = 2000)

Unit: %

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

CNY 101.67 104.95 104.11 104.07 103.85 100.64 91.90 84.30 84.87 80.28

Euro 105.12 88.56 73.50 68.70 80.51 72.30 65.32 68.45 66.56 71.89

Yen 118.75 111.19 101.61 101.73 120.05 123.32 122.18 97.60 102.48 92.36

Singapore dollar 109.50 104.95 103.97 101.74 106.15 99.16 93.35 89.11 89.30 80.14

Taiwan dollar 109.64 111.24 110.66 105.35 110.18 110.61 111.18 108.92 107.96 99.45

Australian dollar 108.49 96.87 72.80 70.50 75.53 69.31 62.90 84.35 65.14 57.49

Korean won 103.03 92.01 90.71 78.54 77.67 71.34 72.34 93.80 85.95 81.39

Thai baht 105.00 103.27 95.10 93.96 96.88 84.86 79.26 82.63 77.91 69.88

Malaysia Ringgit 100.36 101.36 102.10 103.11 103.05 95.43 91.04 92.13 91.39 80.62

VND 104.57 105.24 105.68 100.13 96.29 93.02 85.84 76.40 76.63 74.10

Source: Authors’ calculation based on SBV’s, WEO’s and IFS’s data (2011)

During the same period the USD also depreciated considerably against other currencies

of Viet Nam’s major trading partners (see Table 1). In nominal term, since the VND

experience a considerable depreciation against the USD, one may expected that the currency

also depreciated against other currencies. However, despite the general real appreciation

against the USD, VND appreciated considerably more than other currencies in Asia such as

Singapore Dollar, Korean Won, Malaysian Ringgit and Chinese Yuan. This real appreciation

of VND has reduced the competitiveness of Viet Nam’s export in global markets.



Figure 5: Quarterly real exchange rate index for selected currencies against USD(2000Q1-2010Q3 (base period: 2001Q1

Figure 6: Real exchange rate volatility: Quarterly Coefficient of Variation for selectedcurrencies (2001Q1-2010Q3)



Figure 7: Real exchange rate volatility: Annual Coefficient of Variation for selectedcurrencies (2001Q1-2010Q3)



Real (Effective) Exchange rate determination and misalignment

Real Effective Exchange Rate (REER): Concept, Measurement and Application

The exchange rate policy plays an important role in the macroeconomic policy of aneconomy and exchange rate is one of important tools of this policy. In theory, exchange rate

reflects a relative price (between foreign and domestic currency). As a country engages in

trading and other transactions with several countries in the whole, an aggregate index which

would reflect a global value of the currency is constructed based on a set of bilateral rates and

the intensities of trade between these countries with the home country. The Nominal

Effective Exchange Rate is established on this basis and defined as the exchange rate of the

domestic currency vis-à-vis other currencies weighted by their shares in either the country’s

international trade or payments. (OECD, 2010) The Real Effective Exchange Rate (REER)

on the other hand, is calculated based on NEER adjusted for price deflators or cost indices.

Formally, these two indices NEER and REER are defined as follows.

∏=

=n

j

w

jt t jt e NEER

1

)( ∏=

=n

j

w

t

jt

jt t jt

P

P e REER

1

)(

In which:

• t year

• n number of major trading partners of Viet Nam

• e jt nominal bilateral ER of VND against country j’s currency at year t , measured as

the units of VND per unit of country j’s currency, and expressed as an index

• P t the domestic price index

• P jt country j’s price index

• w jt is the weight assigned to currency j at time t , corresponding to the share of the

country of currency j in Viet Nam’s total trade with the selected countries.

On the empirical ground, these indicators are very useful for analyzing a country’s

macroeconomic policy and performances. Chinn (2005) has shown many cases when these

effective exchange rate measures can be used to addressing different economic issues. He in

particular pointed out that these indicators can be used i) as a factor in determining currency



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Despite of differences in frequency and coverage used, these indices of NEER and

REER show consistent patterns of (i) real depreciation during 2000-2003 and (ii) real

appreciation during 2004-2007 (Nguyen Thi Thu Hang et al .(2010)). Nguyen Thi Thu Hang

(2011) shows a slight improvement during 2008-2010 in the REER but concludes that at the

end of 2010 REER was still more than 20% higher than in 2003 (see Figure 7)

Measuring Real Effective Exchange Rate in Viet Nam: New data and findings.

Given the shortage of data of NEER and REER in Viet Nam as well as some

shortcomings in data coverage and frequency in existing works on these indicators, this study

addresses these shortcomings by providing data with better coverage and higher-frequencies

to revise these indices.

Better coverage.

Price index

It should be noted that in this study we still use CPI and price index for REER. This is a

rather gross simplification according to Chinn(2005). Price indices are collected from

different sources like IMF, Federal Reserve Bank of Cleveland and St. Louis, and Central

Banks of some countries and economies. Except Australia where only quarterly CPI is

available, all other economies have their monthly CPI reported. In some cases where missing

observations occurs different intermediate base was used but finally all indices have a

common base period on January 2000.

Country coverage.

Originally 79 countries were selected for a simple reason that consistent data on trade are

availableon monthly basis only at Global Trade Atlas which includes just 79 countries. These

79 countries howeveraccount for more than 95 percent of total world trade (reported by 162

countries in five years from 2001-2005 (UNCTAD, GTIS). When combined with price data

only 45 countries left but their trade volume still account for 78 percent of total world trade.

The share of these selected countries in trade with Viet Nam is much higher. It will be shown

later that excluding some countries from this REER estimation doesn’t change significantly

the value and patterns of REER overtime until the number of the included countries get down

to somewhat 20

Higher-frequency data.



As Chinn (2005) argues how REER should build depends very much on the purpose of

using it. If REER is to be used for monitoring the movement of exchange rate or to find the

links with the fundamentals of the economy, one would expect that data on REER would be

on a more regular basis or on higher frequency inother words. Since we expect that REER

will be used to understand the patterns of ER dynamics since 2000, monthly data with wider

trade-partner database from Global Trade Information System (GTIS) is preferred. On the

other hand, higher frequency data may contain more noises or unexpected deviations from the

normal pattern. In this case, smoothing is required and lower frequency has some merits.

From the policy point of views, a higher-frequency data will provide more information-

content to the issue and hence providing better understanding of what happening to the key

macro policy variables and conditions, helping the policy authorities to make timely and

appropriate adjustment decision if needed. On the other hand, collecting higher-frequency

data require additional costs. In addition, using GTIS data has a number of merits over using

the Vietnamese trade data because it provides a consistent and disaggregate information over

time. Considering all these factors we start calculate REER on quarter basis using GTIS

trade data covering 45 countries (see Appendix for the list of countries included in the

sample).

Main results and optimal choice of country coverage and data frequency.

Figure 9 shows the movement of four indicators: real effective exchange rate (REER) real

exchange rate (VND/USD), nominal exchange rate (VND/USD) and export growth indexover the period 2000Q1-2010Q2. The export growth index, for example enjoys as high as

nearly 5-percent growth by quarter for the whole period (the estimated time trend is higher

(5.3%) in the period prior to 2007 when the country’s export suffered a setback due to the

global financial crisis. The REER, however experiences two different patterns of change: It

tends to depreciatewith an estimated time trend of 3.1 percent by quarter prior to 2003Q4 and

tends to appreciate afterwards with an estimated of time trend of -1.5 percent. This result

seems to be consistent with all previous studies in terms of trends (which should be the case)

but may differ in terms of magnitudes. The fact that REER is closely correlated with

VND/USD real exchange rate and export growth8 would come with no surprise eitherbecause

US continue to take a significant (20%) share in Viet Nam’s trade volume. This seemingly

close correlation does not imply the causes of REER movement. We will examine the

determinants of REER later in the next Section

8 A simple regression of REER over these two indicators yield highly significant and positive coefficients



Figure 9: Nominal, RER, REER and Export Growth Index

‘Optimal’ choice of country sample and data frequency

As previously noted, there is tradeoff between having more countries in the sample with

higher frequency data for calculating the REER which provides more accurate and timely

information and the costs of required efforts to do so. As indicated in the beginning of this

Section, as more number of countries included and higher frequency data used marginal gains

from more accurate and timely information start to decline. Therefore, an ‘optimal size of

sample should be defined for practical reasons.

Figure 10: REER with different country samples



In Figure10 we compare REER derived from three different set of countries included inthe calculation. The first sample includes all 45 available countries as in the original version

described in the previous Section. The second sample include countries which are in the top

20 of trading partners with Viet Nam either in one of the periods of time in consideration

which are 2000-2004 and 2005-2010. This sample is called ‘Group 20’. The third sample

includes 14 countries which are in the top 200 in both periods. The results show that there is

no significant difference in terms of trend in all three samples, but the magnitudes change

significantly when the sample drops to 14 countries. At some point the difference reaches the

10-percent level. The sample of 20, however provides a result quite close to thatby the

original 45-country option. Conclusion which can be drawn from this ‘simulation’ is that

perhaps a set of 20 countries should be enough to provide a fairly accurate picture of the

REER movements. One precaution needs to be made is that since the directions of trade in

Viet Nam change quite often in the past and perhaps in the near future due to changes in the

world economy and international trade, the composition of this ‘magic 20’ may also be

changed. Updated information is needed if REER to be a monitoring tool.

Real EffectiveExchange Rate Determination and Misalignment

Measuring the Equilibrium Exchange Rate

To examine the exchange rate misalignment in order to find out whether a currency is

overvalued or undervalued, one need toknow what is the equilibrium level of exchange rate.

Most of work on exchange rate determination starts from the concept of the Fundamental

Equilibrium Exchange Rate (FEER) developed by Williamson (1994), which defines the



equilibrium exchange rate as the real exchange rate that satisfies simultaneously internal and

external balances. The internal balance is achieved when the economy reaches its full-

employment output. The external balance, on the other hand is characterized by a sustainable

balance of payments over the medium term, i.e. the level of current account deficits/surpluses

that matches long-term capital inflows/outflows. The FEER tends to abstract from the short-

run cyclical and speculative forces in the foreign exchange market. It often requires large

scale macroeconometric models or a partial trade blocks for a given country to determine the

FEER. An extended version of FEER is Natural Rate of Exchange (NATREX) developed by

Stein (1994, 1995, 2002) which is also based on the macroeconomic internal and external

balances. However, to determine NATREX one needs to consider not only the medium term

but also the long term conditions when capital stock and foreign debts converge to their

steady state.

The FEER approach has been used by the Consultative Group on Exchange Rate Issues

(CGER) at the IMF to provide exchange rate assessments for a number of countries. A study

undertaken by an IMF team in Research Department (IMF,2006), for example, uses a cross-

country regression (including both industrial and emerging-market economies) based on

different exchange rate assessment approach to derive a measure of exchange rate

misalignment for a particular country. The team uses 7 variables (fiscal balance, demographic

factor, net foreign assets, oil balance, economic growth, two dummies for economic crisis

and having a financial center) for calculating a “current account norms” for each country. The

norm is considered as current account equilibrium. The deviation of the underlying current

account for each country from its “norms” is considered as a result of exchange rate

misalignment. Therefore a correction is needed for exchange rate in order to restore this

current account equilibrium. The correction is calculated using exchange rate elasticity to

current account.

While this approach is quite appealing, its application to individual country may have

some caveats. Applying the same ‘norms’ to different countries with different institutional

settings resulting in different policy responses to the same shocks with different pass-through

effects may not be a desirable approach. In fact, the relationship between current account and

other determinants in each country depends on not only a set of country-specific factors but

also, more importantly, the responsiveness of current account to these factors. A cross-

country regression cannot differentiate these differences. It assumes their homogeneity,

instead. The same problem can equally be applied to the case of other approaches outlined in



this IMF study: equilibrium real exchange rate and external sustainability approaches.

Applying this method to the case of Viet Nam, as previously explained, should be undertaken

with extreme care because of cross-section regression problem.

Another approach is based on the concept of Behavioral Equilibrium Exchange Rate

(BEER) by Macdonald (1997) and Clark and MacDonald (1998) that links the real exchange

rate to a set of macroeconomic variables through a single equation setting. This “behavioral

equation” is then statistically estimated using the observed series or long-term values of the

fundamentals, to derive the estimated equilibrium exchange rate. A variant of BEER called

Permanent Equilibrium Exchange Rate (PEER) refers to the approach that aims to decompose

the long-term co-integration vector (fitted value) into permanent and transitory components

with the permanent component being interpreted as the equilibrium exchange rate. Another

approach is based on time-series estimation of the long-run co-integration between real

exchange rate and other medium and long-run fundamentals such as interest rate differentials,

net foreign assets, productivity, and terms of trade. This approach is believed to be more

suitable for the case of Viet Nam, given the data availability. We will explore this approach

in more details.

The BEER approach has also been recently used in a large number of studies on

exchange rate development. In the BEER model by Fraitet al. (2004), the following

explanatory variables are included: productivity differentials, relative price of non-tradable

goods to tradable goods (approximation of the Balassa-Samuelson effect), net foreign assets,terms of trade, openness (sum of exports and imports relative to nominal GDP), real interest

rates differentials, government spending and foreign direct investment to GDP ratios.

Fraitet al. (2004) apply four methods to derive the equilibrium real exchange rate: (i)

Hodrick-Prescott Filter, (ii) Band-Pass Filter, (iii) Engle-Granger method, and (iv) ARDL

method. The last two methods are based on the above-mentioned BEER model.

According to the Engle-Granger procedure, a dependent variable Y t and exogenous

variables X i,t from a long-run relationship (0.1) if all variables are integrated of the same

order and the residuals et are stationary which is tested by ADF unit root test.

0 ,1

n

t i i t t

i

Y X e β β =

= + +∑ (0.1)

On the other hand, the ARDL method is based on the following error correction form of

the ARDL model.



1 2

0 1 1 1 , ,

1 0

( )l l

t t t j t j i j i t j t

j j

Y Y X Y X e β ρ β η γ − − − −= =

∆ = + − + ∆ + ∆ +∑ ∑ (0.2)

Jongwanich (2009) provides another fully operationalized approach to empirically

estimate exchange rate misalignment using BEER model. Five key fundamental variables,

namely, net foreign assets, productivity differentials, government spending toward the

tradable and non-tradable goods, trade policy openness, and terms of trade are generally

included in estimating the long-run equilibrium exchange rate under BEER. This set of

fundamentals is quite similar to that of Fraitet al. (2009). However, the real exchange rate

used by Jongwanich (2009) is not bilateral real exchange rate but multilateral real exchange

rate (REER). After calculating REER and obtaining the above-mentioned set of

fundamentals, Jongwanich (2009) uses Johansen procedure to identify the long-run co-integration between them which also defines the equilibrium exchange rate. In addition, the

permanent values of all fundamentals are generated by Hodrick-Prescott filter.

The second step after determining the equilibrium exchange rate is to examine exchange

rate misalignments. Both Jongwanich (2009) and Fraitet al. (2004) argue that real exchange

rate misalignment is defined as the deviation of actual exchange rate from its long-run

equilibrium and there are two types of misalignments. The first one is the current

misalignment which is the deviation of the actual real exchange rate from the estimated

equilibrium real exchange rate given by the conditioning set of actual fundamentals. It

measures short-run deviations of exchange rate. The second type of deviation is the total

misalignment which is defined as the deviation of the actual real exchange rate from the

estimated equilibrium real exchange rate based on the sustainable values of the fundamentals.

This type of misalignment measures medium-run deviations.

Specifically, according to Clark and MacDonald (1998) and Jongwanich (2009), we

define the actual RER as:

' ' '1 1 2 2t t t t t RER Z Z T β β τ ε = + + + (0.3)

whereT is a set of transitory/short-run variables, 1t Z and 2t Z are medium- and long-run

economic fundamentals. Let 1t Z and 2t Z be the permanent components of medium- and long-

run economic fundamentals, then the long-run equilibrium RER is defined as:



* ' '

1 1 2 2t t t RER Z Z β β = + (0.4)

Then the current misalignment is given by

'

t t t CM T τ ε = + (0.5)

and the total misalignment is

' ' '

1 1 1 2 2 2( ) ( )t t t t t t t TM T Z Z Z Z τ ε β β = + + − + − (0.6)

Model specification: A literature survey

Our study on equilibrium exchange rate and exchange rate misalignment in Viet Nam

will follow the BEER approach as seen in Fraitet al. (2004) and Jongwanich (2009). The real

equilibrium exchange rate is derived from the uncovered interest rate parity (UIP) and

depends on typical macroeconomic fundamentals such as productivity differentials, terms of

trade, net foreign assets, interest rate differentials, trade openness, FDI and government

expenditure. The equation is as follows9:

( , , , , , , ) REER f NFA PROD TOT OPEN GEXP FDI RR= (0.7)

NFA is expected to have a negative relationship with REER. An increase in NFA tends

to have income effect, which raises domestic demand. To restore the internal and external

balances, the non-tradable prices must rise relative to tradable prices to switch the demand

from non-tradable toward tradable goods. As a result, REER decreases (i.e. an appreciation.)

Productivity growth in tradable sector of the domestic economy relative to that of its

main trading partners (PROD) is believed to have negative impact on REER via Balassa-

Samuelson effect. An increase in PROD will lead to a rise in domestic demand for labor

employed in tradable-good production. Under full employment condition, labor would be

drawn from the tradable-good sector toward non-tradable sector. As a result, wage rate in the

non-tradable sector would increase and so would the price of non-tradable goods. To restore

the equilibrium, REER should decline.

An improvement in the terms of trade (TOT) implies a rise in export prices over import

prices. It will then affect REER through both income and substitution effects. On one hand,

an improved terms of trade tends to raise income and thus domestic demand, which causes

REER to decrease as discussed in the case of NFA. On the other hand, relatively lower

import prices imply a higher demand for tradable goods and a lower demand for non-tradable

9 For more detailed derivation, see Clark and MacDonald (1998), Jongwanich (2009).



goods. This substitution effect therefore leads to a decrease in the prices of non-tradable

goods and causes REER to increase. Because income and substitution effects work in

opposite ways, the relationship between TOT and REER is ambiguous. As stated in

Jongwanich (2009), many empirical studies have found that in developing countries, an

improvement in TOT tends to make REER decrease as the income effect is generally stronger

than the substitution effect.

A higher degree of trade openness leads to a higher demand for tradable goods. To

restore the equilibrium, non-tradable prices should decrease in order to switch the demand

from tradable goods toward non-tradable goods. Therefore, REER is expected to be

positively related to the degree of trade openness.

The effect of government expenditure (GEXP) on REER is ambiguous and depends on

whether it is toward tradable or non-tradable products. An increase in GEXP on non-tradablegoods implies higher demand for non-tradable sector and higher tradable prices. This leads to

a decrease in REER or an appreciation. On the other hand, changes in GEXP on tradable

goods have the opposite effect on REER. If it is true that GEXP is mostly spent on non-

tradable goods, we would expect a negative relationship between GEXP and REER.

Both real interest rate differentials and FDI are expected to be negatively related to

REER. Higher real interest rate differentials lead to an increase in capital inflows while

higher level of FDI also implies higher capital inflows. As a result, REER appreciates to

restore the internal and external equilibria.

Table 2: Single country Long-Term REER estimation: Summary of Results for (LosIncome Countries (LICs) and Emerging Market Economies (EMEs)

LICs EMEs

Number Percentage Number Percentage

Number of estimated long term-coefficients

52 51

of which, statistically significant 29 55.8 48 94.1

Number of estimated long term-coefficients with unambiguous signs

30 24

of which, statistically significant 16 53.3 24 100

of which, both with correct sign andstatistically significant

10 33.3 16 66.7

Source: Gabriel Di Bella, Mark Lewis, and Aurélie Martin. (2007)



This model has received a wide application in recent years. (to be filled with cases) and

tends to find many useful applications (Chinn(2005)). However there is a caution on the

number of factors that complicate the estimation of REER in developing countries and its

applications and interpretations. Among these factors are terms of trade shocks, frequent

political and institutional changes, market imperfections, volatility of financial flows,

multiple exchange rate practices and capital controls (Gabriel Di Bella, Mark Lewis, and

Aurélie Martin. (2007)). As a consequence, estimation of REER may provide undesirable and

difficult to explain results. The IMF team shows that only one-third of estimated long-term-

coefficients in models applied to LICs have both correct sign and statistically significant

(Table 2.)

Model selection and empirical implementation for Viet Nam

Despite some issues in data availability and reliability we are conducting an estimation

of REER in Viet Nam using data from 2001Q1 onwards.

Data used to estimate the equilibrium exchange rate and exchange rate misalignment are

quarterly series compiled from the two main sources – GSO and IMF International Financial

Statistics – covering the period 2000Q1 – 2010Q2. NFA is measured as the ratio of NFA of

banking system (IFS database) to nominal GDP (from GSO). PROD is the ratio of Viet

Nam’s real GDP per employment to U.S. real GDP per employment, used as a proxy for

productivity differentials between Viet Nam and its main trading partners. Data are taken

from Viet Nam’s GSO and St. Louis and Cleveland Federal Reserve Bank databases. TOT is

measured by the ratio of export price index to import price index, obtained from GSO. The

degree of openness of Viet Nam’s economy, OPEN, is proxied by the ratio of the sum of

export and import values to nominal GDP, compiled from GSO’s data. GEXP, measuring

government expenditure, is the ratio of government expenditure to nominal GDP. Data are

obtained from GSO and Ministry of Finance. Finally, FDI is the ratio of foreign direct

investment to nominal GDP and taken from IFS database. All data except REER are

seasonally adjusted by the author. All series except GEXP are integrated of order 1 while

GEXP is stationary10.

10 See ADF test of unit root in Appendix XXX.



Model selection.

A standard procedure of estimation of REER is applied. In the first step, long-term

determinants of REER are defined and estimated using an appropriated model and estimation

technique. Then estimated BEER is derived as a fitted value of long-term REER over filtered

fundamentals. Differences between actual values of REER and estimated BEER will

represent the level of misalignment. The most important part in this procedure is the model

selection.

As mentioned earlier, a standard error correction model could be well applied to estimate

long-term coefficients for REER. In the case of more than one co-integrating factors, the

long-term equation would be difficult to identify. The co-integration test shows the system

has 5 co-integration equations (Table 3). Therefore it complicates the identification of long-

term pattern in just one equation. Error correction model seems not a suitable specification

for this model,

Table 3: Unrestricted Co-integration Rank Tests:

Lags interval (in first differences): 1 to 3

Trace Test Max-Eigen Test

HypothesizedNo. of CE(s)

Eigenvalue TraceStatistic

0.05 CriticalValue

Max-EigenStatistic

0.05 CriticalValue

None * 0.864 233.043 95.754 73.761 40.078

At most 1 * 0.780 159.282 69.819 56.050 33.877

At most 2 * 0.699 103.232 47.856 44.467 27.584

At most 3 * 0.562 58.765 29.797 30.567 21.132At most 4 * 0.531 28.198 15.495 28.023 14.265

At most 5 0.005 0.175 3.841 0.175 3.841

Note: Trace test indicates 5 co-integratingeqn(s) at the 0.05 levelMax-eigenvalue test indicates 5 co-integratingeqn(s) at the 0.05 level

Therefore we will apply an Autoregressive Polynomial Distributed Lag model (ARPDL)

instead. Formally, the model has the following form:

where REER is real effective exchange rate

FDI : ratio of FDI to GDP

NFA: Ratio of Net Foreign Asset to GDP



OPEN : index of openness

PROD: index of productivity differentials

and all are in log;

The autoregressive specification is defined as one of the following forms

AR(1) : u =ρu ε

AR(2) : u =ρu ε

AR(4) : u =ρu ε

and AR(1,2): u =ρu ρu ε

The final selection of model will be based on Akaike information and Schwarz criteria.

Table xxx summaries the estimation results for four autoregressive options previously

specified. The AR(1) therefore is selected because it has the lowest value of both Akaike

information and Schwarz criteria.

Table 4: Summary of regression results for four AR options

AR1 AR12 AR2 AR4Coefficie

ntt-

StatisticCoefficie

ntt-

StatisticCoefficie

ntt-

StatisticCoefficie

ntt-

Statistic

FDI -0.056 -1.076 -0.071 -1.238 -0.094 -1.916 -0.099 -1.990

NFA 0.504 3.900 0.502 3.704 0.511 4.271 0.537 4.699

OPEN -0.214 -1.619 -0.255 -1.524 -0.267 -1.724 -0.402 -2.427

TOT -0.191 -0.569 -0.374 -0.910 -0.385 -1.089 -0.095 -0.298

PROD -4.328 -5.609 -3.790 -3.372 -3.484 -4.190 -3.678 -3.817

R-squared 0.954 0.955 0.949 0.950

Adjusted R-squared 0.933 0.931 0.925 0.921

Akaike info criterion -3.662 -3.598 -3.535 -3.419

Schwarz criterion -3.139 -3.026 -3.007 -2.835

F-statistic 46.749 40.237 40.469 32.950

Durbin-Watson stat 2.061 1.831 1.334 1.134

It can be seen that all dependent variable, except NFA have the correct sign but only two

are statistically significant. NFA has opposite sign but statistically significant. This applies to

other AR options and quite consistently. So we find that there is a long-run relationship

between REER, net foreign assets, productivity differentials, openness, and FDI. Among

those fundamentals, productivity differentials, openness and,to some extent FDI yield

expected signs of their long-run coefficients. Compared with experiences in other LICs and

EMEs as mentioned by Chinn (2005) the long-term estimation of REER for Viet Nam is not

bad. There is some puzzles that need to explain, for example the impact of NFA on the



exchange rate equilibrium, but overall the result seems to be sensible. An increase in

productivity differentials by 1% would lead to 4.33% appreciation of REER while a 1% rise

in FDI brings about 0.056% appreciation in the REER. An increase in the openness by 1%

would lead to an appreciation by 0.21% (Table 4) . Finally, the relationship between NFA

and REER for Viet Nam is not as predicted by the theory as a 1% improvement in NFA

position would lead to a depreciation of REER by 0.5%.

Figure 11 plots actual REER and the estimated BEER. First, it is worth noting that the

estimated equilibrium ER exhibits the same pattern as REER over the last 10 years, i.e.

depreciates until the last quarter of 2003 and appreciates afterward. Second, it shows that the

actual exchange rate is overvalued from the first quarter of 2000 until the second quarter of

2002. The currency then continuously undervalued(against the equilibrium)until the earlier of

2008. Since then the VND embarks on an overvaluation path again, albeit with stronger pace

compared to the previous overvaluation period 2000-2002 and reached a total overvaluation

of more than 20% as of mid-2010.

. Figure 11: Equilibrium Exchange Rate

To understand exchange rate misalignment in more details, we construct the total and

current misalignments which are presented in Figure 12. Prior to 2002, total misalignment is

negative (corresponding to overvaluation) and at the highest level of more than -20%. The

period of undervaluation of exchange rate follows with total misalignment fluctuated between

0 and +18% until early2008. Recently, total misalignment has jumped between 0 and -20%. It

is worth noting that much of exchange rate misalignment is caused by short-run factors as we

8.4

8.5

8.6

8.7

8.8

8.9

9.0

00 01 02 03 04 05 06 07 08 09

VNREERVNREER_HP

REE_PDL_AR1BEER_PDL

8.4

8.5

8.6

8.7

8.8

8.9

9.000:1 02:1 04:1 06:1 08:1 10:1

BEER_PDL REE_PDL_AR1 VNREER



also observe high level of current misalignment corresponding to high level of total

misalignment.

Figure 12: Exchange Rate Misalignment: Total and Current

Concluding remark

The estimation results on long-term REER and derived exchange rate misalignment has

confirm that fact that the currency has been consistently appreciated in the first three years of

this decade and continue so albeit with much stronger pace in the last three years. In between

these two periods the currency experienced also a highly volatile depreciation period which

peaked as higher as 20 percent before the global crisis. This result needs a proof check,

including some sensitivity analysis regarding model selection and variable choice.

Nevertheless it raises a lot of questions about the way the authority handled the exchange rate

policy. In particularly, it would be interest to know whether this exchange rate misalignment

is an outcome of active, discretionary actions for certain policy objectives, whether the

authority was aware about and took any actions to smooth some of these volatile

misalignments? What would be the impact of this misalignment on some economic

indicators? Better understanding of some of these issues would help to deal better with

economic conditions in the future. While it is not easy to give answers to all these questions,

we try to shed some light on one of these issues: the impact of exchange on exports. The next

Section will deal with this issue in more details.

(POSSIBLE EXTENSION: CHECK NEW MODEL WITJ GEXP INSTEAD OF NFA>>)

-.3

-.2

-.1

.0

.1

.200:1 02:1 04:1 06:1 08:1 10:1

-.20

-.15

-.10

-.05

.00

.05

.10

.15

00:1 02:1 04:1 06:1 08:1 10:1



The effects of exchange rate on trade balance: An econometric

assessment

The relationship between exchange rate and trade balance has long been discussed and

explored, both from theoretical and empirical aspects. There are a great number of papers

which estimate the import demand and export function; most of them focus on the aggregate

level such as Senhadji (1998), Vasquez and Charquero (2007), Garg and Ramesh (2005). The

main purpose of these papers is to evaluate the impact of exchange rate variation on the

current account or balance of payment, or in other words, testing the Marshall-Lerner

condition.

Konandreaset al . (1978) estimates import demand function for U.S. wheat from five

regions in which U.S. export of wheat to a region depends on the average production of

wheat in that region (a substitute), relative price of wheat between U.S. and that region,

average income, wheat export under special concessional programs. In their model, there are

two channels that exchange rate can affect U.S. export of wheat to a region: through the

relative price (or real exchange rate between U.S. and that region) and through per capita

income of the region denominated in USD.

Another study of import demand function for a specific commodity is Gunawardanaet al.

(2008) which explores the Thai demand for Australian export of dairy products. This paper

uses the traditional import demand function in which exchange rate and prices are separated.The relative price is the ratio of export price over an index of competitors’ price.

Model specification

In order to assess the effects of exchange rate on Viet Nam’s exports, we will use a

vector error correction model (VECM). This model can be applied to both export quantity

and export revenue. Using export revenue as a dependent variable instead of export quantity

may have some merits due to the following reasons:

• The results from both versions may not be much different except for themagnitude of estimated coefficients: When we take logarithm, export revenue is the

sum of quantity and price and if we bring price over to the other side, under our model

it will go to the error terms. This method therefore still gives us unbiased estimates of

the coefficients11.

11 More details are in the Appendices



• The results obtained using export quantity will not show the explicit effect of

exchange rate on current account balance and balance of payment which is one of our

ultimate objectives. In contrast, using export revenue will help people see right away

the effect of exchange rate variation on export revenue and hence on current account

balance.

• Using export quantity will limit us to only several commodities where data on

export quantity to different destinations are available.

One important advantage of using VECM is that it allows us to understand in more

details the interaction between a set of variables in both long run and short run. The VECM

of export function used in this part is specified below.

α ξ η γ β − − −= =

∆ = + ∆ + ∆ + ∆ +

∑ ∑

p q

t t i t i j t j t t i j

EXPORT EXPORT EXRATE DEMAND u 1 1 1 1 1 11 1

(0.8)

α ξ η γ β − − −

= =

∆ = + ∆ + ∆ + ∆ +∑ ∑ p q

t t i t i j t j t t i j

EXRATE EXPORT EXRATE DEMAND u 2 1 2 2 2 2

1 1

(0.9)

λ ξ = + +t t t

EXPORT c EXRATE (0.10)

In the model, EXPORT is natural logarithm of Viet Nam’s exports to U.S., DEMAND is

natural logarithm of U.S. total imports as a proxy for U.S. demand, EXRATE is real exchange

rate between VND and USD. Equation (0.10) represents the long-run equilibrium or co-

integrating vector of exports and exchange rate while α1and α2 represent the speed of

adjustment parameters.

In another option, we separate the nominal exchange rate from the price indices to

explore the impact of both nominal exchange rate and the price factors but in separation on

the export performance. This set-up has it own merits over the first option since usually

business are often making the trade deals in nominal terms (adjusted by inflation in some

cases). So perhaps the real exchange rate may not always fully affect the export decision.

People tend to continue to export even when the real exchange rate appreciates but nominal

exchange rate continues to be devaluated. This has been typical case for Viet Nam during

recent years and this may help to explain why export continues to grow in this environment.

This phenomenon could be labeled as ‘exchange rate illusion’ which is quite similar to

‘money illusion’ in the labour market.



In this case, the VECM with three endogenous variables: Viet Nam’s export, VND

exchange rate and Viet Nam’s price index will have the following form”

∆ ξ β ξλ +∑ η ∆ ρ

∑ η ∆

∑ η ∆τ ∆ ∆ (1.xx)

∆ ξ β ξλ +∑ η ∆ ρ ∑ η ∆

∑ η ∆τ ∆ ∆ (1.xx)

∆ ξ β ξλ +∑ η ∆ ρ

∑ η ∆

∑ η ∆τ ∆ ∆ (1.xx)

where ξ and λ are two integrating factors and all variables in log

We use US total imports and US price index as two exogenous variables in the model,

based on, an assumption that seems to be valid that Viet Nam’ exports are not significant

enough to influence the price and market in the US.

Data

At this stage, US Trade data is used for estimation. We use a high level of disaggregation

at three-digit SITC data. There are 262 sub-categories or sub-sectors in this classification and

Viet Nam exports to the US cover all 262 sub-sectors. Some sub-sectors have been dropped

out from estimation due to insufficient number of observations for regression, so only 195

sub-sectors remained. We may try out other markets/destinations of exports for Viet Nam by

using monthly Global Trade Information System (GTIS) trade database will be used. This

database includes monthly, HS 2-digit import and export data of some 75 countries in the

world and provides comprehensive, consistent information of exports, imports of key trading

partners of Viet Nam. This dataset has been used for measuring REER in the first Section.

One possibility is to use a higher level of aggregation by suing two-digit SITC instead of

three-digit at this stage.

Price and exchange rate data are taken from GSO and Vietcombank as in the case of

measuring REER.



Main findings and implications

Co-integration tests and long-term impact of exchange rate on export

In the previous Section, we adapt a VECM with two co-integrating equations/vectors.

This assumption passed co-integration test for all sub-sectors. Therefore two co-integrating

equations have the following forms

Equation 1: EXPORT αβEXRATE

Equation 2: PRICE λρEXRATE

βi then is considered as a long-term elasticity of export of sub-sector i with respect to

exchange rate.

Equation (1) and (2) reflects restrictions imposed on the dynamic long-term relationships

between exchange rate and exports, on the one hand, and between the exchange rate and price

level, on the other hand. To justify these restrictions, a Granger causality test is needed. We

have performed these tests for all 196 subsectors and results for Granger causality between

exports and exchange rate are given in Table A4.

Table 5: Export coverage of pairwise Grange Causality Tests between Exchange Rate andExports

Pairwise GrangeCausality Tests betweenExchange Rate andExports

1% significant

level

5% significant

level

10% significant

level

Not

significant

Total

1% significant level 10.7 1.0 11.1 3.4 26.2



Not significant 1.1 0.4 0.9 16.9 19.2

Total 32.9 11.8 23.4 31.9 100.0

Table 5 summaries these test results for all 195 subsectors with export coverage. Each

row of Table 5 shows four level of significance of the test that ‘exchange rate do not Granger

cause exports” while each column shows these four level of significance of the test that

‘exports do not Granger cause exchange rate”. For example, row 1 shows that 26.2% of total



exports fall into subsectors in which at 1% level of significance, one cannot reject the

hypothesis that “exchange rate Granger cause exports”. Out of these 26.2%, we cannot reject

a two-way causality at the same 1% level in those subsectors which accounts for 10.7 percent

of total exports. It can be seen from Table 5 that, in most cases one cannot reject the

hypothesis that “exchange rate Granger cause exports”.

Table 6 shows the estimation results for long-term elasticities for exports based on the

above-specified model. It turns out that nearly 60 percent of Viet Nam’s exports do not

respond significantly to change in exchange rate in the long-term. About one-quarter of total

exports would increase by less than 10 percent if exchange rate depreciates by 1%. There are

some abnormal cases when the long-term coefficients are of wrong sign, but either they are

statistically insignificant or they have a very tine share in total exports. So this abnormality

doesn’t change much the whole picture of how exchange rate would affect exports. Table A5

give more details at the sub-sector level of these estimation results.

Table 6: Sign and level of significance of long-term exchange rate elasticity (measured byshare in total Viet Nam exports)

1% level of significance



Notsignificant

Total

(Positive) Correct sign 32.44 2.96 3.57 29.17 68.14 abnormal- 0.31 0.01 0.32

less then -10 5.21 0.2 3.49 1.89 10.79

between -10 and -5 25.32 0.11 0.07 8.1 33.6

between -5 and 0 1.6 2.65 0.01 19.17 23.43

less than 5 17.88 17.88

Negative (wrong sign) 0.46 0.33 2.56 28.49 31.84 between 5 and 10 0.37 0.02 0.32 0.71

more than 10 0.01 0.32 2 10.29 12.62

abnormal+ 0.08 0.01 0.54 0.63

TOTAL 32.9 3.29 6.13 57.66 99.98

The VEC models also give us information on how export would react to a change in

nominal exchange in the short-term. This information can be obtained from impulse

responses functions derived from estimation results. These impulse responses data for the

whole set of sub-sectors is given in Table A5. It shows how export responds to a one-off

shock in exchange rate over time. with 8 time interval or 2 years time. Based on this

information, we construct a transitional diagram as shown in Figure 13



Figure 13: Short-term responses of exports to a exchange rate shock : Transitionalimpulse responses

The horizontal axis depicts the values of responses of individual sub-sectors to a

exchange rate shock in the first period. It can be seen that these responses are very different

across sub-sectors. Some sectors responded with increased exports, some see their declined.

That is quite normal in the short-term because of some adjustment costs involved (J-curve is

just one justification for the decline of exports due to a depreciation shock. The vertical axisplaces the same responses but in two subsequent periods with two time intervals, e.g. period 2

(blue dots) and period 4 (red dots). Placing all sub-sectors on this diagram helps us to

understand how these sub-sectors have been affected by the shock overtime. If a sub-sector

is in the first quadrant (Q1) that means the sub-sector continues to gain from depreciation

over time. If it is in the third quadrant, it has been negatively affected all the time. If a sub-

sector is in quadrant IV, gains from depreciation are very much short-lived: these sub-sectors

are called ‘shouting stars’. Finally, a sub-sector clear exhibits J-curve pattern if it is in the

second quadrant: it suffers some losses in the first period but recovers in the subsequent

times.

To gain better understand on the extent an exchange rate shock could affect the whole

export sector, we construct a similar bubble diagram (Figure 14) attaching each sector in the

diagram to its relative share in total exports to US. It can be seen in Figure 14 that most of

subsectors which have higher share in total exports fall into ‘rising stars’ category, gaining



continuously from a depreciation shock. This implies that overall a depreciation shock can

have significant export gains.

Figure 14: Short-term responses of exports to a exchange rate shock : Transitionalimpulse responses in bubble diagram.

Table 7 is a another version of transitional diagram, The difference is that it is

represented in a matrix form and weighted in each cell by export volumes of the

corresponding sub-sector. All sub-sectors are now divided into different categories dependingon the extent it is affected by the shock.

Table 7: Export values affected by a exchange shock in two periods: 2 and 4

Period_2 Period4Drops bymore than

10%

Dropsbetween 0and 2.5 %

Gainsbetween 0and 2. 5%

Gains

between 2,5

and 5 %

Total

Drops by more than 10% 7.07 0.11 0.28 7.45

Drops between 0 and 2.5 % 0.31 1.85 2.16

Gains between 0 and 2% 12.27 3.46 74.54 90.27

Total 19.60 3.58 76.68 0.00 100.00

It can be now seen from Table 7 that nearly third-quarter of exports (74.54%) gains from

depreciation shock in two subsequent periods 2 and 4, e.g. in the first year after the shock.



One-quarter suffer losses and about one-fifth suffers continued losses in both two periods. A

similar picture, albeit with slightly difference in distribution can be seen in Table 8 which

shows transitional matrix between period 6 and period 8.

Table 8: : Export values affected by a exchange shock in two periods: 6 and 8

Period_6 Period8Drops bymore than

10%

Dropsbetween 0and 2.5 %

Gainsbetween 0and 2. 5%

Gains

between 2,5

and 5 %

Total

Drops by more than 10%18.60 0.42 0.47 19.49

Drops between 0 and 2.5 %1.43 1.43

Gains between 0 and 2%0.17 0.15 56.51 56.83

Gains between 2 and 5%22.03 22.03

Total18.77 0.58 80.49 0.03 100

Concluding remark

Using a standard econometric model to estimate the impact of a depreciation shock on

exports has shown that the impact in general positive both in long term and short-term. The

extent and pattern of impact, however vary significantly across sub-sectors. There are some

sector that could gains permanently and significantly from such a shock over time. At the

same time, there are also losers of this shock, but overall the shock seems to be favorable to

the whole export sector. (TBC)

POSSIBLE EXTENTION: THIRD PARTY IN THE MARKET. CHINESE FACTOR ONVIET NAM EXPORT



Towards an flexible and effective ER management mechanism:

Public Policy Dimension of ER management

TENTATIVE. NOT FOR COMMENTS TO THIS

STAGE

This Section will highlight some key issues of ER management mechanism with

emphasis placed on the cost and benefits of different policy options for ER regimes. The

impact of change in ER on foreign debts, on firm’s performances and other broader

macroeconomic indicators will be considered. Perhaps a quantitative model that links the

exchange rate with these key policy variables is examined. One possibility is to use IMF’s

DSA model for assessing impact of an ER change of the country’s indebtedness.

Bank’s information of firm’s trade and foreign exchange balances is crucial for this analysis.

So the access to this information is critical for the study’s implementation.

In-depth interviews of some firms are not excluded because this is an important source of

information that reveals firm-level foreign exchange risk management.

ER Management and Policy Objectives

In this part we evaluate the relationship between the current ER arrangements and the

policy objectives of controlling inflation and reducing trade deficit. These objectives have

received great attention in ER management in Viet Nam.

Stable exchange rate arrangements and inflation control

In theory, stabilizing the ER could boost trust in domestic currency, force the

government to control budget deficit and credit growth and thus improve policy credibility.

When these factors are controlled, inflation will decline and stabilize. Moreover, in an

economy with high level of dollarization like Viet Nam, with the threat of return inflation and

the reduction of trust in VND, people will turn their back against domestic currency and shift

to gold and USD for savings and self-insurance. Thus, managing the ER can affect inflationbecause ER changes not only affect tradable goods but also non-tradable if they are priced in

USD. These are the reasons that contribute to the hesitation of SBV in letting VND/USD rate

be determined by market forces over the past years.



Analysis from the previous section shows that in the past, Viet Nam’s ER management

followed a two-phase cycle with devaluation of VND during periods of economic instabilities

and reverting to a rigid regime when the economy regained its stability (see figure 1).

During the beginning of the 1990s, and after witnessing the terrible economic impacts of

skyrocketing inflation, Viet Nam had tried to control inflation to stabilize macroeconomic

conditions and restore public trust in VND. During this period, a rather fixed ER arrangement

as had been used in practice were appropriate. Inflation had been controlled effectively

during 1992-1996.

However, this success was not repeated in later periods. During the Asian financial crisis

and the recovery years (1997-2003), VND had been continuously devalued. Yet high

inflation (around 10%) did not persist and this period even ended in a deflation sub-period of

2000-2001. Also, the application of relatively rigid ER arrangements from 2004 to 2008 didnot help achieve inflation control. Inflation rate increased over the years and the period ended

with high inflation (20% in 2008).

Why were there such various effects on inflation under the same ER arrangement over

different periods? Studies by Vo Tri Thanh et al . (2000), Camen (2006) and other authors

show that the rapid expansion of money supply and credit growth are major causes of high

inflation in Viet Nam over the past two decades. An expansionary monetary policy together

with inflation expectation often leads to actual inflation in the next phase of the business

cycle. ER policies amplify the impacts of contemporary monetary policy on the economy.

This explains why during 1992-1996 when the economy is effectively controlled, a stable ER

arrangement contributed to the stabilization and reduction of inflation. It also explains why

from 2004 to 2008, inflation returned despite the rigid ER arrangement. The main reason for

return inflation was the rapid increase in money supply and credit in the economy during

these years.

However, it should be noted that rapid increase in money supply and credit cannot

explain the low inflation period during 1997-2003. This period of low inflation was due to the

economic crisis and the decline in aggregate demand.That is why the big devaluation of VND

(around 36%) during this period did not cause inflation to return. Similarly, in 2009, when the

world economy was in recession, reduction in world prices helped ease inflation pressure in

Viet Nam down to 6.88% from 20% in 2008.



Yet, a recent quantitative study by Nguyen Thi Thu Hang and Nguyen Duc Thanh (2011)

showed a positive correlation between devaluation and inflation in Viet Nam during 2001-

2010. This result is different from previous studies which show no clear relation between the

two variables. This implies that the volatilities in the exchange markets that occurred in both

2009 and 2010 have had their impacts on the public expectations and speculation. Thus, high

inflation causes expectation of devaluation of VND while devaluation in turn causes inflation

expectation and thus real inflation as expectation has always been the most important

determinant of inflation in Viet Nam.

The second reason that explains the different effects of the stable ER arrangement is

closely related to the impossible trinity12

. Before, in the closed economy where there were no

free flows of capital, a relatively fixed ER arrangement accompanied by monetary policy to

control inflation was feasible and in fact proved to be effective during 1992-1996. However,

as the Vietnamese economy integrates more into the world economy, even though Viet Nam

has not yet completely freed its capital account, the easier flows of capital pose new

challenges in implementing the policies in the impossible trinity.

Viet Nam’s balance of payments shows that for many years before 2006, foreign

exchange inflow to Viet Nam was not large. Until 2005, foreign exchange inflows reached

only around USD 9 billion (not including unofficial inflows). However, within only two

years 2006-2007, foreign exchange actually flooded domestic market due to foreign indirect

investment, making official reserves increase by 1.6 times the cumulative reserves. This

situation posed new challenges for monetary policy in 2007. Within the first 6 months of

2007, SBV had to inject a large amount of VND (equivalent to roughly USD 9 billion) to buy

foreign exchange to keep the ER stable. The excess supply of domestic currency was not

timely sterilized. At the same time, raw material prices increased rapidly. The result was the

rise of inflation, which for the first time in the decade reached double digits.However, even if

the injected money had been sterilized, we would not be able to sustain the interest rate. This

is an unprecedented and difficult task for SBV. It was clear that the policy of keeping stable

the ER during 2005-2007 did not help control inflation, instead it contributed to the increased

pressure for higher inflation due to the fact that SBV needed to buy USD to maintain the set

12Impossible trinity states that we cannot achieve at the same time all three of the following: (i) a fixed ER

regime; (ii) free capitalflows and (iii) the independence of monetary policy.



ER. Clearly, international integration brings with it new challenges for SBV and ER

management.

In short, ER policy by itself cannot be used effectively to control inflation. Keeping the

ER stable without controlling monetary and credit growth as well as other macroeconomic

instruments to manage total demand will not be effective in controlling inflation especially

with relatively free movement of capital. On the contrary, if total demand and monetary

policy are effectively managed, an ER arrangement that follows market determinants will not

necessarily create inflation. It is the hesitation, inconsistency and lack of transparency in ER

policy that can create inflation expectation which in turn can change in to real inflation in the

next period if macroeconomic policies are not oriented toward better controlling inflation.

Exchange rate arrangement and trade balance

The analysis of ER trends in the previous sections shows a real appreciation trend for

VND over the past few years and this has considerably reduced the competitiveness of Viet

Nam’s export in world markets, especially in more recent years. This fact is evident in Viet

Nam’s large and prolonged trade deficit since the beginning of the decade. The trade deficit

became alarmingly large since Viet Nam joined WTO in 2006, reaching USD 18 billion in

2008. In 2009, due to economic crisis and import declining faster than export, trade deficit

was down to USD12.3 billion. Trade deficit was USD12.4 billion in 2010 partly due to the

devaluation efforts by SBV.13

Trade deficit is not a bad thing itself. When an economy is open to the world and has a

high growth rate, the demand for imports will increase rapidly together with the flows of

foreign investment for domestic economic growth. This is especially true for Viet Nam

because more than 90% of total import value is in materials. It should be noted that Viet Nam

is a small country and thus export and import values depend heavily on world market supply,

demand and prices. The volatilities of world material prices together with the decline in

demand due to economic crisis are major determinants of Viet Nam’s trade deficit.

However, if the ER is managed too rigidly, a worsening trade deficit will cause adverseeffects on the economy. Figure 5shows a close relationship between Viet Nam’s trade deficit

and real ER trend. During the 1992-1996 period, despite the relative stability of the ER, Viet

Nam’s inflation rate was much higher than that of the US making VND appreciate in real

terms. Associated with this real appreciation trend was the ever enlarging trade deficit. The

13 Trade deficit data are from GSO which uses fob for export prices and cif for import prices.



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non-tradable (domestically produced and consumed) goods due to the high level of

dollarization through linkages between tradable and non-tradable sectors. These problems can

be more serious if such devaluation decision is sudden and inconsistent with previous

statements of SBV because it increases speculative activities, reduces trust in VND and

policy credibility and increases transaction costs as discussed above. These are difficult tasks

for SBV due to the increasing pressure from conflicting interest groups on government

policy.

Conclusion and Policy Implications

…

Some final notes



References

Camen, U. (2006), “Monetary Policy in Viet Nam: The Case of a Transition Country,” BISWorking Paper No. 31. Bank for International Settlement, Basel.

Chinn, Menzie, 2000, “The Usual Suspects: Productivity and Demand Shocks and Asia-Pacific Real Exchange Rates,” Review of International Economics 8(1): 20-43.

DeGregorio, Jose and Holger Wolf, 1994, "Terms of Trade, Productivity, and the RealExchange Rate," NBER Working Paper #4807 (July).

Gabriel Di Bella, Mark Lewis, and Aurélie Martin (2007): Assessing Competitiveness andReal Exchange Rate Misalignment in Low-Income Countries. IMF Working Paper,August 2007. Policy Development and Review Department

GSO (2011), GSO Statistics

Hsieh, David, 1982, "The Determination of the Real Exchange Rate: The ProductivityApproach," Journal of International Economics 12(2): 355-362.

IFS (2011), International Financial Statistics

IMF (2000), Annual Report on Exchange Arrangements and Exchange Restrictions.

IMF (2008), Annual Report on Exchange Arrangements and Exchange Restrictions.

Mai Thu Hien (2007), “Solutions for Exchange Rate Policy of Transition Economy of VietNam,” Doctoral dissertation, Martin Luther Universitat

MalinAdolfson (2002)Implications of Exchange Rate Objectives under Incomplete ExchangeRate Pass-Through. Bank Working Paper Series. June 2002, No135

Menzie D. Chinn (2005). A Primer on Real Effective Exchange Rates: Determinants,Overvaluation, Trade Flows and Competitive Devaluation.. NBER Working Paper No.11521. August 2005

Nguyen Thi Thu Hang (2011), “Should We Take the Foreign Exchange Market for Granted?”Working Paper .

Nguyen Thi Thu Hang and Nguyen Duc Thanh (2011), “Macroeconomic Determinants of Viet Nam’s Inflation during 2000-2011: Evidence and Analysis,” VEPR Working Paper ,http://vepr.org.vn/en/index.php?option=com_content&task=view&id=710&Itemid=487

Nguyen Thi Thu Hang, Dinh Tuan Minh, To Trung Thanh, Le Hong Giang, Pham Van Ha(2010), “Exchange Rate Policy: Choices for Recovery,” in Nguyen Duc Thanh edt. Viet

Nam Annual Economic Report 2010: Choices for Sustainable Growth, Tri ThucPublishing House.

Nguyen Tran Phuc (2009), “Implications of Exchange Rate Policy for Foreign ExchangeMarket Development: Viet Nam, 1986-2008,” Griffen University, Australia

Nguyen Tran Phucvà Nguyen Duc-Tho, (2009), “Exchange Rate Policy in Viet Nam, 1985-2008,” ASEAN Economic Bulletin, Vol. 26, No. 2, pp. 137-163

Vo Tri Thanh, Dinh Hien Minh, DoXuan Truong, Hoang Van Thanh và Pham Chi Quang(2000), “Exchange Rate Arrangement in Viet Nam: Information Content and PolicyOptions,” East Asian Development Network (EADN), Individual Research Project

WEO (2011), World Economic Outlook Statistics



Appendices

Table A 1. Viet Nam’s ER Arrangements, 1989-2011

Time Arrangement De facto ER characteristics

Before 1989 Multiple ER

arrangement

- Three-tier ER system

- A parallel black foreign exchange marketexisted.

1989-1990 Crawling bands - Single official ER (OER).

- OER was adjusted based on inflation rates, interest rates, balance

of payment and ER in the parallel black market.

- Commercial banks were allowed to set ERs within a band of +/-

5% around the OER.

- Tight control over the use of foreign exchange.

1991-1993 Pegged exchange rate

within horizontal bands

- Tighter control over the use of foreign exchange and restrictions

on border exit.

- Establishment of an official fund for ER stabilization.

- Establishment of two foreign exchange transaction floors in Ho

Chi Minh City and Hanoi.

- OER was set based on auction-based rates at the two floors; SBV

played a dominant role in the two floors.

- Commercial banks were allowed to set their own ERs within a

band of +/-0.5% around the announced OERs.

1994-1996 Conventional fixed peg

arrangement

- Inter-bank foreign exchange market replaced the two transaction

floors; SBV continued to play dominant role.

- OER were stable and set by SBV basing on inter-bank ERs.

- Commercial banks were allowed to set their own ERs within aband of +/-0.5% around the announced OERs. ER band was

widened +/-0,5% to +/-1% (11/1996).

- OER was stable at around 11.100VND/USD.

1997-1998 Crawling bands - ER band was widened from +/-1% to +/-5% (02/97) and from +/-



5% to +/-10% (13/10/97) then narrowed to +/-7% (7/8/98).

- OER was devaluated to 11,800VND/USD (16/02/98) and then to

12,998 VND/USD (07/08/98).

1999-2000 Conventional fixed peg

arrangement

- OER was set at the average of inter-bank rates of the previous

business day (since 28/2/99)

- ER band was reduced to +/-0.1%.

- OER was stable at around 14,000VND/USD.

2001-2007 Crawling peg - OER was gradually devaluated from 14,000VND/USD in 2001 to

16,100 VND/USD in 2007.

- ER band for commercial banks was widened to +/-0.25% (from

1/7/02 to 31/12/06) and to +/-0.5% in 2007.

2008-2011 Crawling bands - OER was gradually devaluated to 16,100VND/USD at the

beginning of 2008 then to 16,500 VND/USD (from 06/08 to 12/08),

then to 17,000 VND/USD (from 12/08 to 11/09), to 17,940

VND/USD (from 11/09 to 01/10), to 18,544 VND/USD (from 02/10

to 08/10), again to 18,932 VND/USD(from 08/10 to 02/11), and

then to 20,693 (from 02/2011).

- ER band was adjusted many times, widened to +/-0.75% (from

23/12/07 to 09/03/08), then to +/-1% (from 10/03/08 to 25/06/08),

to +/-2% (from 26/05/08 to 05/11/08), to +/-3% (from 06/11/08 to

23/03/09), to +/-5% (from 24/03/09 to 25/11/09), narrowed to +/-3%

(from 26/11/09 to 11/02/2011), and then narrowed to +/-1% (from

11/02/2011).

Source:Authors’s update from Nguyen Thi Thu Hanget al . (2010)



8.4

8.5

8.6

8.7

8.8

8.9

00 01 02 03 04 05 06 07 08 09 10

LNR EE R LNR EE R_HP

-.8

-.6

-.4

-.2

.0

.2

.4

00 01 02 03 04 05 06 07 08 09 10

LNN FA BS LNN FA BS _H P

-4.36

-4.34

-4.32

-4.30

-4.28

-4.26

-4.24

-4.22

-4.20

-4.18

00 01 02 03 04 05 06 07 08 09 10

L NP RO D L NP RO D_ HP

-.10

-.05

.00

.05

.10

.15

.20

.25

.30

00 01 02 03 04 05 06 07 08 09 10

LNTOT LNTOT_HP

-2.9

-2.8

-2.7

-2.6

-2.5

-2.4

-2.3

-2.2

-2.1

00 01 02 03 04 05 06 07 08 09 10

LNOPE N LNOPE N_HP

-2.4

-2.2

-2.0

-1.8

-1.6

-1.4

-1.2

-1.0

-0.8

-0.6

00 01 02 03 04 05 06 07 08 09 10

LNGEX P LNGEX P_HP

-7.2

-6.8

-6.4

-6.0

-5.6

-5.2

-4.8

00 01 02 03 04 05 06 07 08 09 10

L NF DI L NF DI_ HP



Null Hypothesis: Unit root (individual unit root process)Series: LNPROD, LNTOT, LNOPEN, LNFDI, LNGEXP, LNNFABS,

LNNFACB, LNREER, LNREERSDRDate: 06/28/11 Time: 16:10Sample: 2000Q1 2010Q2Exogenous variables: Individual effectsAutomatic selection of maximum lags

Automatic lag length selection based on SIC: 0 to 5Total number of observations: 354Cross-sections included: 9

Method Statistic Prob.**

ADF - Fisher Chi-square 42.8554 0.0008ADF - Choi Z-stat -2.40414 0.0081

** Probabilities for Fisher tests are computed using an asymptotic Chi-square distribution. All other tests assume asymptotic normality.

Intermediate ADF test results KEYVAR

Series Prob. Lag Max Lag Obs

LNPROD 0.1268 4 9 37

LNTOT 0.6984 0 9 41LNOPEN 0.3620 0 9 41

LNFDI 0.2958 1 9 40LNGEXP 0.0000 0 9 41

LNNFABS 0.1121 5 9 36LNNFACB 0.5394 1 9 40LNREER 0.3089 2 9 39

LNREERSDR 0.6413 0 9 39

Null Hypothesis: Unit root (individual unit root process)Series: LNPROD, LNTOT, LNOPEN, LNFDI, LNGEXP, LNNFABS,

LNNFACB, LNREER, LNREERSDRDate: 06/28/11 Time: 16:10Sample: 2000Q1 2010Q2Exogenous variables: Individual effectsAutomatic selection of maximum lagsAutomatic lag length selection based on SIC: 0 to 4Total number of observations: 353Cross-sections included: 9

Method Statistic Prob.**

ADF - Fisher Chi-square 185.887 0.0000ADF - Choi Z-stat -11.4095 0.0000

** Probabilities for Fisher tests are computed using an asymptotic Chi-square distribution. All other tests assume asymptotic normality.

Intermediate ADF test results D(KEYVAR)

Series Prob. Lag Max Lag ObsD(LNPROD) 0.0000 0 9 40D(LNTOT) 0.0001 0 9 40

D(LNOPEN) 0.0001 0 9 40D(LNFDI) 0.0000 0 9 40

D(LNGEXP) 0.0000 4 9 36D(LNNFABS) 0.0221 0 9 40D(LNNFACB) 0.0018 0 9 40D(LNREER) 0.0192 1 9 39

D(LNREERSDR) 0.0000 0 9 38



Modeling the impact of exchange rate on export and import:Quantity or value?

Consider the following model specification

log log log (1)

and an alternative specification which uses quantity of export instead of export volume as a

dependent variable

log log log μ l o g Ω (2)

Since V=P* Q, equation (1) can be expressed as follows:

log log log log log log

or

log log log log

Therefore,equation (1) can be seen as a restricted version of equation (2), given that µ=-

1. It follows that, even when equation (1) is selected, we are still able to get unbiased

estimations of key variables of interest e.g. exchange rate and foreign demand.



Table A 2: Viet Nam destinations of exports2005-2010

countryname 2005 2006 2007 2008 2009 2010 (*) total Share in total

United States 6,631.2 8,566.7 10,632.8 12,901.1 12,287.8 7,972.6 58,992.1 20.9 20.9 Japan 4,538.6 5,289.9 6,133.6 9,110.4 6,957.5 4,532.9 36,563.0 12.9 33.8 China 2,549.3 2,485.9 3,214.4 4,337.0 4,741.1 3,634.1 20,961.8 7.4 41.2 Australia 2,574.0 3,738.1 3,832.9 4,457.9 2,460.0 1,680.1 18,743.0 6.6 47.8 Singapore 1,813.8 1,650.2 2,141.1 2,382.6 2,269.2 1,000.9 11,257.9 4.0 51.8 Germany 1,719.1 2,173.9 2,946.9 3,523.9 3,187.3 2,166.0 15,717.0 5.6 57.4 United Kingdom 1,348.7 1,497.1 1,688.7 1,846.1 1,589.4 970.4 8,940.4 3.2 60.5 France 1,188.9 1,467.6 1,719.2 1,828.0 1,679.6 1,033.2 8,916.5 3.2 63.7 Malaysia 1,020.9 1,415.9 1,839.5 2,333.2 2,060.6 1,261.0 9,931.0 3.5 67.2 South Korea 694.0 924.9 1,391.6 2,037.1 2,370.0 1,619.6 9,037.1 3.2 70.4 Thailand 890.5 904.4 1,205.5 1,458.9 1,397.4 778.1 6,634.8 2.3 72.8 Netherlands 665.1 836.5 1,050.1 1,231.3 1,173.1 787.6 5,743.7 2.0 74.8 Belgium 746.0 906.5 1,079.8 1,334.7 879.4 492.0 5,438.4 1.9 76.7 Philippines 777.9 672.8 842.7 1,653.4 1,277.3 1,260.9 6,485.1 2.3 79.0 Taiwan 689.6 843.4 1,027.3 1,191.0 906.5 629.9 5,287.7 1.9 80.9 Spain 678.1 863.5 1,141.5 1,584.3 1,275.8 757.4 6,300.5 2.2 83.1 Italy 585.3 764.0 950.1 1,177.9 970.6 633.3 5,081.2 1.8 84.9 Hong Kong 399.1 516.9 651.7 888.4 1,176.3 922.0 4,554.5 1.6 86.5 Indonesia 439.0 846.8 994.2 717.7 653.7 496.1 4,147.6 1.5 88.0 Canada 462.6 576.5 710.3 893.2 930.2 590.7 4,163.5 1.5 89.5 Switzerland 156.6 179.2 215.7 322.6 1,869.7 1,514.4 4,258.2 1.5 91.0 Russia 171.1 348.2 518.7 849.1 660.6 465.7 3,013.4 1.1 92.0 Mexico 274.4 376.9 473.3 614.5 613.5 440.0 2,792.6 1.0 93.0 Turkey 110.0 189.4 313.3 443.7 456.9 405.1 1,918.4 0.7 93.7 Austria (Customs) 185.7 237.4 302.5 384.7 290.9 186.3 1,587.4 0.6 94.3 Sweden 157.1 211.0 257.3 281.0 252.8 152.1 1,311.3 0.5 94.7 India 120.3 159.2 159.4 388.1 427.0 296.8 1,550.7 0.5 95.3 Poland 91.9 174.8 241.1 279.1 184.9 111.2 1,082.9 0.4 95.6 Denmark 124.2 139.8 169.4 207.6 207.0 116.5 964.4 0.3 96.0 Norway 103.7 116.3 141.7 180.5 164.4 108.2 814.7 0.3 96.3 South Africa 75.0 92.7 135.0 169.9 222.0 221.6 916.2 0.3 96.6 Brazil 47.8 75.6 106.8 200.1 219.6 245.5 895.3 0.3 96.9 Czech Republic 37.4 73.5 97.3 108.2 102.6 73.1 492.1 0.2 97.1 Greece 71.3 81.5 107.4 119.1 99.1 53.0 531.5 0.2 97.3 New Zealand 64.7 85.1 91.6 109.6 92.8 59.9 503.7 0.2 97.5 Ukraine 41.3 54.3 82.8 171.3 116.3 59.1 525.1 0.2 97.6 Ireland 73.5 96.4 133.4 132.2 102.1 55.1 592.7 0.2 97.9 Slovakia 11.5 15.5 89.0 136.7 145.7 77.9 476.3 0.2 98.0 Finland 42.2 53.3 68.3 87.7 71.0 49.3 371.9 0.1 98.2 Hungary 23.9 30.1 59.9 59.7 80.8 71.5 325.8 0.1 98.3



Chile 38.8 53.6 55.1 80.6 126.2 51.2 405.4 0.1 98.4 Algeria 28.2 45.1 55.1 99.3 94.2 73.1 395.0 0.1 98.6 Romania 28.3 44.9 38.2 66.4 86.5 62.5 326.8 0.1 98.7 Argentina 16.0 44.7 51.7 96.5 76.1 55.3 340.3 0.1 98.8 Cote d Ivoire 91.4 65.0 36.6 73.1 79.4 31.3 376.9 0.1 98.9 Portugal

20.8

26.3

44.1

68.3

68.5

41.1

269.2

0.1

99.0

Bulgaria 17.4 23.7 47.7 83.9 49.7 29.8 252.2 0.1 99.1 Serbia 17.4 28.2 50.5 75.4 68.8 27.6 267.8 0.1 99.2 Croatia 20.9 31.1 47.0 62.7 52.5 27.2 241.3 0.1 99.3 Colombia 12.1 25.6 41.7 65.0 60.8 41.4 246.7 0.1 99.4 Senegal 37.2 37.3 26.0 39.8 70.0 24.7 234.9 0.1 99.5 Morocco 16.0 19.7 39.5 47.1 46.8 25.2 194.2 0.1 99.5 Peru 15.8 19.7 26.6 44.1 42.7 24.3 173.3 0.1 99.6 Venezuela 13.0 21.7 25.9 43.3 52.8 21.3 178.1 0.1 99.7 Sri Lanka 10.6 15.5 20.9 28.1 22.3 21.3 118.7 0.0 99.7 Slovenia 8.9 10.8 12.6 18.8 13.1 11.0 75.2 0.0 99.7 Lithuania 4.9 8.0 13.3 25.4 27.2 8.2 87.1 0.0 99.7 Jordan 4.4 6.4 17.5 28.1 26.0 15.6 98.1 0.0 99.8 Kazakhstan 4.3 5.1 12.0 23.2 22.0 15.1 81.7 0.0 99.8 Cyprus 4.6 7.0 8.8 12.0 11.3 7.0 50.6 0.0 99.8 Kenya 18.1 7.7 14.7 16.5 7.0 64.0 0.0 99.9 Ecuador 6.7 6.0 4.3 8.9 18.2 7.6 51.7 0.0 99.9 Estonia 1.9 4.3 4.9 7.1 5.4 3.3 27.0 0.0 99.9 Costa Rica 1.2 3.3 8.0 14.4 14.0 5.3 46.2 0.0 99.9 Mauritius 3.0 3.4 5.5 9.5 21.3 4.2 46.8 0.0 99.9 Iceland 4.6 5.2 7.1 7.7 4.7 4.0 33.3 0.0 99.9 Latvia 3.4 3.9 5.3 8.4 7.5 4.2 32.6 0.0 99.9 Guatemala 0.7 3.1 2.6 4.9 13.7 5.0 30.0 0.0 99.9 Uruguay 1.2 2.3 4.1 6.2 9.0 7.2 30.1 0.0 100.0 Paraguay 1.1 2.7 2.6 6.5 4.7 3.0 20.7 0.0 100.0 Malta 1.2 7.2 1.4 2.3 2.2 1.2 15.6 0.0 100.0 Nicaragua 2.0 3.3 3.3 2.3 3.7 3.5 18.1 0.0 100.0 El Salvador 1.5 1.9 1.7 3.3 5.8 1.0 15.2 0.0 100.0 Luxembourg 0.2 0.1 0.2 0.4 2.0 3.1 5.9 0.0 100.0 Bolivia 0.9 1.5 2.5 3.5 3.0 1.6 12.9 0.0 100.0 Panama 0.5 0.7 1.2 1.8 2.8 3.3 10.2 0.0 100.0 Azerbaijan 1.0 0.1 0.3 3.3 5.1 0.5 10.4 0.0 100.0 Honduras 0.1 0.1 0.4 0.8 2.2 2.4 6.1 0.0 100.0

Source: GTIS, 2011

(*) Data for the first seven months



Table A 3; List of countries used for calculating NEER and REER

Argentina France Kuwait Singapore

Australia Germany Laos South Africa

Austria Greece Spain

Belgium Holland Malaysia Sweden

BrazilHong Kong

ChineseNew Zealand Switzerland

Cambodia Hungary Norway Thailand

Canada India Philippines The Philippines

Cezh Indonesia Poland The U.K

China Iraq Portugal The U.S

Chinese Taipei Ireland Republic of Korea Turkey

Denmark Italy Russia Ukraine

Finland Japan Saudi Arabia United Arab Emirates



Table A 4 Grange Causality Tests: Exchange Rate and Exports, by subsector

Exchange Rate donot Granger cause

Exports

Exports do notGranger causeExchange Rate

sector descript F-stat Prob. F-stat Prob.

1 Live animals other than animals of division 03 2.062 0.089 0.365 0.549

12 Meat, other than of bovine animals, and edibleoffal, fresh, chilled or frozen

3.098 0.021 2.316 0.071

17 Meat and edible meat offal, prepared orpreserved n.e.s.

0.806 0.573 1.520 0.225

22 Milk and cream and milk products other thanbutter or cheese

2.472 0.049 0.418 0.741

34 Fish, fresh (live or dead), chilled or frozen 1.564 0.193 2.363 0.132

35 Fish, dried, sltd r in brine; smkd fish (whethr rnt cookd before or durng the s

6.504 0.000 5.486 0.001

36 Crustaceans molluscs,aqutc invrtbrts frsh(lve/dead) ch sltd etc.; crustaceans i

1.301 0.289 2.043 0.144

37 Fish, crustaceans, molluscs and other aquaticinvertebrates, prepared or preserved

1.131 0.370 0.590 0.560

42 Rice 1.771 0.142 0.432 0.652

44 Maize (not including sweet corn) unmilled 1.374 0.258 4.257 0.046

45 Cereals, unmilled (other than wheat, rice,barley and maize)

2.423 0.054 0.861 0.499

46 Meal and flour of wheat and flour of meslin 2.551 0.042 1.019 0.319

47 Cereal meals and flours, n.e.s. 11.204 0.000 4.388 0.005

48 Cereal preparations and preparations of flour

or starch of fruits or vegetables

1.169 0.350 0.280 0.600

54 Vegetables, fresh, chilled, frozen or simplypreserved; roots, tubers and other

3.160 0.016 0.825 0.369

56 Vegetables, roots and tubers, prepared orpreserved, n.e.s.

3.435 0.012 4.394 0.006

57 Fruit and nuts (not including oil nuts), fresh ordried

2.099 0.085 0.152 0.859

58 Fruit preserved, and fruit preparations(excluding fruit juices)

2.109 0.088 1.463 0.234

59 Fruit juices (incl. Grape must) and vegetable juices, unfermented and not contai

2.483 0.052 2.030 0.101

61 Sugars, molasses, and honey 6.767 0.000 4.236 0.005

62 Sugar confectionery 4.398 0.004 1.570 0.19971 Coffee and coffee substitutes 2.370 0.056 1.528 0.231

73 Chocolate and other food preparationscontaining cocoa, n.e.s.

3.415 0.013 1.131 0.368

74 Tea and mate 1.842 0.126 0.375 0.544

75 Spices 2.731 0.034 1.086 0.381

81 Feeding stuff for animals (not includingunmilled cereals)

1.823 0.129 1.336 0.255



98 Edible products and preparations, n.e.s. 1.782 0.141 2.961 0.046

111 Nonalcoholic beverages, n.e.s. 1.289 0.293 4.006 0.052

112 Alcoholic beverages 2.332 0.058 2.935 0.095

122 Tobacco, manufactured (whether or notcontaining tobacco substitutes)

4.375 0.004 3.313 0.018

223 Oil seeds and oleaginous fruits, whole or

broken, of a kind used for extracting

3.436 0.014 5.447 0.001

231 Natural rubber, balata, gutta-percha, guayule,chicle and similar natural gums,

2.077 0.090 1.149 0.344

232 Synthetic rubber; reclaimed rubber; waste,pairings and scrap of unhardened rubb

3.042 0.020 0.143 0.868

247 Wood in the rough or roughly squared 1.306 0.288 0.214 0.886

248 Wood, simply worked and railway sleepers of wood

2.748 0.032 0.701 0.558

265 Vegetable textile fibers (other than cotton and jute), raw or processed but not

2.679 0.037 2.876 0.040

266 Synthetic fibers suitable for spinning 6.602 0.000 9.272 0.000

269 Worn clothing and other worn textile articles;rags 3.377 0.013 0.748 0.531

273 Stone, sand and gravel 2.798 0.028 1.827 0.184

274 Sulfur and unroasted iron pyrites 1.281 0.300 2.479 0.065

278 Crude minerals, n.e.s. 3.061 0.020 0.503 0.683

287 Ores and concentrates of base metals, n.e.s. 4.802 0.002 1.435 0.244

291 Crude animal materials, n.e.s. 2.742 0.035 1.903 0.127

292 Crude vegetable materials, n.e.s. 2.456 0.051 1.568 0.208

333 Petroleum oils and oils from bituminousminerals, crude

1.246 0.313 0.148 0.703

334 Petroleum oils and oils from bituminousminerals (other than crude), and product

5.742 0.001 1.924 0.118

335 Residual petroleum products, n.e.s. and relatedmaterials

1.987 0.103 1.249 0.308

342 Liquefied propane and butane 1.058 0.410 0.079 0.925

344 Petroleum gases and other gaseoushydrocarbons, n.e.s.

3.256 0.015 0.234 0.872

431 Animal or vegetable fats and oils processed;waxes and inedible mixtures or prep

2.322 0.059 1.779 0.190

511 Hydrocarbons, n.e.s. and their halogenated,sulfonated, nitrated or nitrosated d

1.714 0.154 0.716 0.495

513 Carboxylic acids and anhydrides, halides,peroxides and peroxyacids; their halog

2.087 0.091 0.952 0.464

514 Nitrogen-function compounds 2.966 0.026 1.579 0.196515 Organo-inorganic compounds, heterocycliccompounds, nucleic acids and their salt

4.892 0.002 2.866 0.040

522 Inorganic chemical elements, oxides andhalogen salts

4.016 0.005 0.127 0.724

523 Metallic salts and peroxysalts of inorganicacids

1.820 0.134 2.267 0.085

524 Inorganic chemicals, n.e.s.; organic andinorganic compounds of precious metals

1.034 0.424 0.182 0.672



533 Pigments, paints, varnishes and relatedmaterials

2.536 0.046 3.272 0.024

541 Medicinal and pharmaceutical products, otherthan medicaments (of group 542)

2.261 0.069 3.196 0.027

542 Medicaments (including veterinarymedicaments)

2.571 0.044 9.359 0.000

551 Essential oils, perfume and flavor materials 1.729 0.150 5.408 0.025553 Perfumery, cosmetics, or toilet preparations,

excluding soaps2.495 0.048 2.990 0.034

554 Soap, cleansing and polishing preparations 2.024 0.098 5.088 0.003

571 Polymers of ethylene, in primary forms 3.967 0.007 2.348 0.063

573 Polymers of vinyl chloride or otherhalogenated olefins, in primary forms

2.390 0.058 3.176 0.022

575 Plastics, n.e.s., in primary forms 1.725 0.151 0.000 0.985

579 Waste, parings and scrap, of plastics 1.617 0.180 0.967 0.390

581 Tubes, pipes and hoses of plastics 2.611 0.043 2.828 0.032

582 Plates, sheets, film, foil and strip of plastics 2.047 0.098 3.026 0.024

583 Monofilament with a cross-sectionaldimension exceeding 1 mm, rods, sticks and p 2.125 0.081 0.935 0.340

591 Insecticides, fungicides, herbicides, plantgrowth regulators, etc., disinfectan

2.424 0.052 0.050 0.951

592 Starches, inulin and wheat gluten;albuminoidal substances; glues

2.326 0.061 0.382 0.767

593 Explosives and pyrotechnic products 3.206 0.017 1.321 0.285

597 Prepared additives for mineral oils etc.; liquidsfor hydraulic transmissions; a

5.822 0.001 1.222 0.329

598 Miscellaneous chemical products, n.e.s. 2.605 0.038 2.237 0.143

611 Leather 3.455 0.013 0.437 0.819

612 Manufactures of leather or composition

leather, n.e.s.; saddlery and harness

1.506 0.211 7.957 0.007

613 Furskins, tanned or dressed (including piecesor cuttings), assembled or unassem

2.800 0.032 0.928 0.479

621 Materials of rubber, including pastes, plates,sheets, rods, thread, tubes, etc.

1.238 0.316 6.269 0.017

625 Rubber tires, interchangeable tire treads, tireflaps and inner tubes for wheels

2.296 0.065 5.815 0.001

629 Articles of rubber, n.e.s. 3.677 0.009 1.771 0.153

633 Cork manufactures 2.921 0.025 1.405 0.259

634 Veneers, plywood, particle board, and otherwood, worked, n.e.s.

0.883 0.519 0.083 0.775

635 Wood manufactures, n.e.s. 2.110 0.083 0.057 0.813641 Paper and paperboard 1.433 0.236 0.034 0.855

642 Paper and paperboard, cut to size or shape, andarticles of paper or paperboard

1.803 0.138 7.991 0.000

651 Textile yarn 2.582 0.041 5.722 0.007

652 Cotton fabrics, woven (not including narrow orspecial fabrics)

2.865 0.028 1.470 0.236

653 Woven fabrics of manmade textile materials(not including narrow or special fabr

3.982 0.007 1.517 0.215



654 Woven fabrics of textile materials, other thancotton or manmade fibers and narr

2.636 0.037 2.009 0.149

655 Knitted or crocheted fabrics (including tubularknit fabrics, n.e.s., pile fabri

1.610 0.180 0.270 0.606

656 Tulles, lace, embroidery, ribbons, trimmingsand other small wares

6.455 0.000 1.437 0.242

657 Special yarns, special textile fabrics andrelated products

3.105 0.020 1.022 0.412

658 Made-up articles, wholly or chiefly of textilematerials, n.e.s.

4.312 0.004 3.858 0.012

659 Floor coverings, etc. 3.896 0.007 2.741 0.040

661 Lime, cement, and fabricated constructionmaterials, except glass and clay mater

2.465 0.051 1.449 0.242

662 Clay construction materials and refractoryconstruction materials

5.724 0.001 1.101 0.391

663 Mineral manufactures, n.e.s. 3.926 0.007 1.806 0.145664 Glass 3.285 0.014 0.418 0.661

665 Glassware 2.426 0.050 1.669 0.204666 Pottery 4.727 0.002 3.645 0.016

667 Pearls, precious and semiprecious stones,unworked or worked

1.838 0.129 0.832 0.486

674 Iron and nonalloy steel flat-rolled products,clad, plated or coated

1.829 0.128 1.284 0.264

676 Iron and steel bars, rods, angles, shapes andsections, including sheet piling

0.790 0.585 0.070 0.793

678 Iron and steel wire 3.319 0.013 0.232 0.633

679 Iron and steel tubes, pipes and hollow profiles,fittings for tubes and pipes

1.705 0.160 2.836 0.042

681 Silver, platinum and other platinum group

metals

3.031 0.022 1.870 0.142

682 Copper 1.354 0.266 6.724 0.013

684 Aluminum 1.651 0.169 0.063 0.803

689 Miscellaneous nonferrous base metalsemployed in metallurgy and cermets

1.550 0.200 6.352 0.002

691 Metal structures and parts, n.e.s., of iron, steelor aluminum

10.998 0.000 1.722 0.164

692 Metal containers for storage or transport 3.663 0.010 3.388 0.017

693 Wire products (excluding insulated electricalwiring) and fencing grills

2.638 0.039 1.969 0.125

694 Nails, screws, nuts, bolts, rivets and similar

articles, of iron, steel, copper

2.332 0.062 2.721 0.048

695 Tools for use in the hand or in machines 4.225 0.005 1.770 0.148

696 Cutlery 2.843 0.028 1.030 0.392

697 Household equipment of base metal, n.e.s. 1.056 0.411 4.817 0.034

699 Manufactures of base metal, n.e.s. 1.536 0.202 0.181 0.673

711 Steam or other vapor generating boilers, super-heated water boilers and auxiliar

2.216 0.075 2.366 0.066

713 Internal combustion piston engines and partsthereof, n.e.s.

6.307 0.000 4.081 0.006



714 Engines and motors, nonelectric (other thansteam turbines, internal combustion

2.378 0.060 5.899 0.001

716 Rotating electric plant and parts thereof, n.e.s. 2.333 0.058 0.467 0.499

721 Agricultural machinery (excluding tractors)and parts thereof

1.879 0.118 0.276 0.602

722 Tractors (other than mechanical handling

equipment)

7.830 0.000 3.130 0.023

723 Civil engineering and contractors' plant andequipment

1.487 0.222 1.362 0.271

724 Textile and leather machinery, and partsthereof, n.e.s.

1.533 0.203 1.232 0.274

726 Printing and bookbinding machinery, and partsthereof

2.471 0.047 0.051 0.822

727 Food-processing machines (excludingdomestic)

2.240 0.067 4.947 0.032

728 Machinery and equipment specialized forparticular industries, and parts thhereo

1.755 0.144 1.937 0.172

731 Machine tools working by removing metal orother material 3.155 0.018 1.623 0.194

733 Machine tools for working metal, sinteredmetal carbides or cermets, without rem

1.991 0.100 0.044 0.834

735 Parts and accessories suitable for use solely orprincipally with metal working

3.127 0.020 2.580 0.049

737 Metalworking machinery (other than machinetools) and parts thereof, n.e.s.

4.842 0.002 0.942 0.470

741 Heating and cooling equipment and partsthereof, n.e.s.

3.706 0.007 8.651 0.005

742 Pumps for liquids, whether or not fitted with ameasuring device; liquid elevato

2.561 0.041 0.292 0.592

743 Pumps (not for liquids), air or gas compressorsand fans; ventilating hoods inco

2.022 0.095 0.895 0.350

744 Mechanical handling equipment, and partsthereof, n.e.s.

4.973 0.002 2.079 0.108

745 Nonelectrical machinery, tools and mechanicalapparatus, and parts thereof, n.e.

3.802 0.007 2.995 0.045

746 Ball or roller bearings 2.590 0.039 0.017 0.896

747 Taps, cocks, valves and similar appliances forpipes, boiler shells, tanks, etc.

6.493 0.000 1.742 0.154

748 Transmission shafts and cranks; bearinghousings and plain shaft bearings; gears

4.921 0.002 0.299 0.876

749 Nonelectric parts and accessories of machinery, n.e.s.

3.878 0.007 0.897 0.497

751 Office machines 3.499 0.012 2.217 0.082

752 Automatic data processing machines and unitsthereof; magnetic or optical reader

0.699 0.653 5.503 0.008

759 Parts and accessories suitable for use solely orprincipally with office machine

1.889 0.121 2.389 0.073

761 Tv receivers (including video monitors &projectors) wheth r nt incorp radiobroa

2.669 0.038 4.652 0.003



763 Sound recorders or reproducers; televisionimage and sound recorders or reproduc

6.001 0.001 9.072 0.000

764 Telecommunications equipment, n.e.s.; andparts, n.e.s., and accessories of appa

1.789 0.138 2.193 0.126

771 Electric power machinery (other than rotatingelectric plant of power generating

2.169 0.077 0.551 0.581

772 Electrical apparatus for switching or protectingelectrical circuits or for maki

2.744 0.033 2.031 0.129

773 Equipment for distributing electricity, n.e.s. 1.105 0.387 2.335 0.069

774 Electro-diagnostic apparatus for medical,surgical, dental or veterinary science

1.813 0.139 10.222 0.000

775 Household type electrical and nonelectricalequipment, n.e.s.

1.037 0.422 0.118 0.889

776 Thermionic, cold cathode or photocathodevalves and tubes; diodes, transistors a

2.513 0.047 1.228 0.320

778 Electrical machinery and apparatus, n.e.s. 0.934 0.486 0.503 0.482781 Motor cars and other motor vehicles

principally designed for the transport of pe

6.224 0.000 3.133 0.029

784 Parts and accessories for tractors, motor carsand other motor vehicles, trucks,

2.640 0.038 0.538 0.659

785 Motorcycles (including mopeds) and cycles,motorized and not motorized; invalid

4.431 0.004 0.772 0.600

786 Trailers and semi-trailers; other vehicles, notmechanically propelled; speciall

1.870 0.124 2.260 0.086

791 Railway vehicles (including hovertrains) andassociated equipment

2.035 0.093 0.657 0.423

792 Aircraft and associated equipment; spacecraft(including satellites) and spacecr

2.578 0.043 2.593 0.056

793 Ships, boats (including hovercraft) and floating

structures

4.825 0.002 3.006 0.025

811 Prefabricated buildings 1.756 0.148 4.152 0.009

812 Sanitary, plumbing and heating fixtures andfittings, n.e.s.

4.217 0.005 2.009 0.104

813 Lighting fixtures and fittings, n.e.s. 1.109 0.381 0.171 0.681

821 Furniture and parts thereof; bedding,mattresses, mattress supports, cushions an

5.385 0.001 2.470 0.066

831 Trunks, suitcases, vanity cases, binocular andcamera cases, handbags, wallets,

1.542 0.203 1.168 0.337

841 Men's or boys' coats, jackets, suits, trousers,shirts, underwear etc. Of woven

5.166 0.002 4.823 0.002

842 Women's or girls' coats, capes, jackets, suits,trousers, dresses, skirts, under

2.036 0.093 3.037 0.089

843 Men's or boys' coats, capes, jackets, suits,blazers, trousers, shirts, etc. (ex

2.022 0.095 0.294 0.591

844 Women's or girls' coats, capes, jackets, suits,trousers, dresses, underwear, et

2.464 0.053 6.819 0.000

845 Articles of apparel, of textile fabrics, whetheror not knitted or crocheted, n.

2.887 0.028 8.828 0.000

846 Clothing accessories, of textile fabrics, 2.521 0.044 0.029 0.867



whether or not knitted or crocheted (o

848 Articles of apparel and clothing accessories of other than textile fabrics; head

3.674 0.009 2.280 0.084

851 Footwear 2.885 0.027 3.736 0.014

871 Optical instruments and apparatus, n.e.s. 1.355 0.271 2.017 0.108

872 Instruments and appliances, n.e.s., for medical,

surgical, dental or veterinary

2.780 0.034 7.266 0.000

874 Measuring, checking, analysing andcontrolling instruments and apparatus, n.e.s.

1.938 0.108 4.549 0.039

881 Photographic apparatus and equipment, n.e.s. 1.501 0.216 4.681 0.008

882 Photographic and cinematographic supplies 4.026 0.005 1.975 0.137

884 Optical goods, n.e.s. 2.176 0.076 1.161 0.325

885 Watches and clocks 0.985 0.453 1.091 0.303

891 Arms and ammunition 1.027 0.428 0.576 0.452

892 Printed matter 1.543 0.200 1.390 0.246

893 Articles, n.e.s. of plastics 3.342 0.014 8.163 0.000

894 Baby carriages, toys, games and sporting

goods

3.802 0.008 4.293 0.004

895 Office and stationery supplies, n.e.s. 1.579 0.192 1.825 0.162

896 Works of art, collectors' pieces and antiques 3.207 0.017 1.286 0.296

897 Jewelry, goldsmiths' and silversmiths' wares,and other articles of precious or

2.092 0.085 0.542 0.466

898 Musical instruments, parts and accessoriesthereof; records, tapes and other sou

2.990 0.023 4.791 0.004

899 Miscellaneous manufactured articles, n.e.s. 5.309 0.001 6.340 0.001

931 Special transactions and commodities notclassified according to kind

1.825 0.132 2.451 0.081

950 Coin, including gold coin; proof andpresentation sets and current coin

2.745 0.033 1.509 0.224

971 Gold, nonmonetary (excluding gold ores andconcentrates)

4.321 0.004 5.877 0.001

984 Estimate of import items valued under $251and of other low valued items nonexem

5.605 0.001 5.559 0.001



Table A 5. Co-intergation coeffients by sub-sectors

Sector Sector description exportt/ex rate

elasticity

price/exrate

elasticity

T-rationfor

exportt/ex rate

elasticity

T-rationfor

price/exrate

elasticity

1 Live animals other than animals of division 03

1.081 -2.306 0.460 -3.383

12 Meat, other than of bovine animals, andedible offal, fresh, chilled or frozen (

13.337 -2.925 6.835 -8.572


86.102 5.470 1.922 1.267

22 Milk and cream and milk products otherthan butter or cheese

29.832 -6.368 2.886 -22.040

34 Fish, fresh (live or dead), chilled orfrozen

-4.067 -2.796 -9.263 -5.745

35 Fish, dried, sltd r in brine; smkd fish(whethr r ntcookd before or durng the s

-1.598 -1.861 -0.238 -2.324

36 Crustaceans molluscs,aqutcinvrtbrtsfrsh(lve/dead) chsltd etc.; crustaceans i

0.980 -2.882 0.475 -5.126

37 Fish, crustaceans, molluscs and otheraquatic invertebrates, prepared or preserv

-0.425 -1.842 -0.441 -2.592

42 Rice -19.679 -2.963 -4.747 -8.037

44 Maize (not including sweet corn)unmilled

-8.176 -1.969 -9.869 -4.281

45 Cereals, unmilled (other than wheat, rice,

barley and maize)

-2.132 -5.685 -0.178 -4.241

46 Meal and flour of wheat and flour of meslin

-13.443 -6.569 -2.095 -7.109

47 Cereal meals and flours, n.e.s. 6.810 -0.446 0.398 -0.288

48 Cereal preparations and preparations of flour or starch of fruits or vegetables

-7.423 -2.572 -4.200 -3.456

54 Vegetables, fresh, chilled, frozen orsimply preserved; roots, tubers and other

-1.796 -3.009 -0.996 -7.043


0.723 -1.207 0.138 -1.504

57 Fruit and nuts (not including oil nuts),

fresh or dried

-5.803 -2.800 -5.088 -7.105


-0.491 -2.030 -0.092 -3.933

59 Fruit juices (incl. Grape must) andvegetable juices, unfermented and notcontai

-5.104 -1.410 -1.763 -1.636

61 Sugars, molasses, and honey 2.651 -2.295 1.214 -4.163

62 Sugar confectionery -8.642 -2.726 -6.034 -6.118

71 Coffee and coffee substitutes -0.442 -1.094 -0.106 -1.083




-27.599 -2.069 -3.409 -3.065

74 Tea and mate -5.927 -2.271 -7.947 -3.271

75 Spices -8.406 -3.394 -5.773 -6.830


-10.004 -4.930 -23.934 -39.217

98 Edible products and preparations, n.e.s. -11.548 -3.351 -9.176 -10.966111 Nonalcoholic beverages, n.e.s. 2.098 -2.966 1.292 -3.494

112 Alcoholic beverages -1.211 -3.098 -0.900 -4.563


134.821 -8.225 2.844 -11.449

223 Oil seeds and oleaginous fruits, whole orbroken, of a kind used for extracting

-3.359 -2.837 -1.670 -5.400

231 Natural rubber, balata, gutta-percha,guayule, chicle and similar natural gums,

1.353 -1.441 0.347 -1.976

232 Synthetic rubber; reclaimed rubber;waste, pairings and scrap of unhardened

rubb

-478.580 -38.014

-3.478 -3.853

247 Wood in the rough or roughly squared 10.545 -3.491 0.720 -14.067

248 Wood, simply worked and railwaysleepers of wood

25.723 0.231 2.591 0.311

265 Vegetable textile fibers (other than cottonand jute), raw or processed but not

-58.871 -4.911 -4.858 -7.753

266 Synthetic fibers suitable for spinning -66.964 -15.010

-4.050 -7.599

269 Worn clothing and other worn textilearticles; rags

3.934 -3.084 0.314 -3.346

273 Stone, sand and gravel -19.637 -8.273 -1.712 -11.591

274 Sulfur and unroasted iron pyrites 27.801 -2.851 2.664 -8.410

278 Crude minerals, n.e.s. 5.550 -1.350 0.668 -1.948287 Ores and concentrates of base metals,

n.e.s.21.175 -7.363 0.997 -3.093

291 Crude animal materials, n.e.s. -3.350 -2.948 -1.941 -6.122

292 Crude vegetable materials, n.e.s. -10.104 -3.194 -6.362 -10.058


-20.029 -3.407 -1.876 -4.061


-3.104 -1.989 -2.254 -3.734

335 Residual petroleum products, n.e.s. andrelated materials

8.627 -2.603 1.644 -4.405

342 Liquefied propane and butane 0.092 -2.839 0.035 -7.268344 Petroleum gases and other gaseoushydrocarbons, n.e.s.

3.241 -2.822 0.747 -5.292

431 Animal or vegetable fats and oilsprocessed; waxes and inedible mixturesor prep

-145.494 41.434 -4.894 4.153

511 Hydrocarbons, n.e.s. and theirhalogenated, sulfonated, nitrated ornitrosated d

-76.139 -6.513 -9.722 -21.193




51.805 -15.452

1.818 -2.223

514 Nitrogen-function compounds 29.341 -1.575 4.198 -1.375

515 Organo-inorganic compounds,heterocyclic compounds, nucleic acidsand their salt

-9.639 -1.214 -0.644 -2.766


45.030 5.419 0.575 0.803

523 Metallic salts and peroxysalts of inorganic acids

-195.247 -15.527

-5.727 -10.163


27.901 0.147 2.298 0.125


-8.742 -1.030 -1.465 -2.402

541 Medicinal and pharmaceutical products,other than medicaments (of group 542)

-8.805 -2.242 -2.662 -6.697


2.094 -3.090 0.224 -3.246

551 Essential oils, perfume and flavormaterials

68.315 6.627 4.153 2.902

553 Perfumery, cosmetics, or toiletpreparations, excluding soaps

-5.666 -3.514 -1.236 -6.099

554 Soap, cleansing and polishingpreparations

10.893 3.587 1.524 1.467

571 Polymers of ethylene, in primary forms -38.513 -0.981 -5.641 -3.584


-6.275 -1.402 -3.431 -6.057


579 Waste, parings and scrap, of plastics -7.819 -1.867 -0.425 -1.146

581 Tubes, pipes and hoses of plastics 657.790 106.260

2.692 2.712

582 Plates, sheets, film, foil and strip of plastics

-68.896 -5.649 -5.862 -7.056

583 Monofilament with a cross-sectionaldimension exceeding 1 mm, rods, sticksand p

21.685 -3.666 0.722 -6.013

591 Insecticides, fungicides, herbicides, plantgrowth regulators, etc., disinfectan

-19.107 -3.492 -1.040 -3.467


-2.363 -1.121 -0.118 -0.660

593 Explosives and pyrotechnic products -39.017 4.208 -2.468 2.517

597 Prepared additives for mineral oils etc.;liquids for hydraulic transmissions; a

-99.558 -8.716 -2.632 -17.779


611 Leather -10.480 -2.458 -2.425 -4.604

612 Manufactures of leather or compositionleather, n.e.s.; saddlery and harness

-1.397 -3.003 -1.223 -3.941

613 Furskins, tanned or dressed (includingpieces or cuttings), assembled or

-31.127 -2.745 -10.129 -7.704



unassem

621 Materials of rubber, including pastes,plates, sheets, rods, thread, tubes, etc.

-48.629 -5.567 -4.057 -4.751

625 Rubber tires, interchangeable tire treads,tire flaps and inner tubes for wheels

-24.405 -2.319 -13.626 -3.520

629 Articles of rubber, n.e.s. -7.290 1.117 -4.112 0.908

633 Cork manufactures 0.557 -1.632 0.269 -2.626634 Veneers, plywood, particle board, and

other wood, worked, n.e.s.1.526 -1.038 0.024 -0.325

635 Wood manufactures, n.e.s. -3.842 -1.356 -1.969 -2.310

641 Paper and paperboard -38.346 -3.635 -4.447 -9.056

642 Paper and paperboard, cut to size orshape, and articles of paper orpaperboard

-11.115 -2.388 -1.109 -4.275

651 Textile yarn -33.522 -7.090 -5.023 -6.078

652 Cotton fabrics, woven (not includingnarrow or special fabrics)

-41.191 -0.413 -4.248 -0.350

653 Woven fabrics of manmade textilematerials (not including narrow orspecial fabr

-138.767 17.957 -3.040 3.040

654 Woven fabrics of textile materials, otherthan cotton or manmade fibers and narr

64.859 18.689 4.051 3.669

655 Knitted or crocheted fabrics (includingtubular knit fabrics, n.e.s., pile fabri

-0.027 -1.185 -0.005 -1.277

656 Tulles, lace, embroidery, ribbons,trimmings and other small wares

76.969 4.566 1.833 1.248


5.985 1.552 0.504 0.830

658 Made-up articles, wholly or chiefly of

textile materials, n.e.s.

-8.840 -1.325 -3.667 -2.142

659 Floor coverings, etc. -8.358 -5.057 -1.738 -5.573

661 Lime, cement, and fabricatedconstruction materials, except glass andclay mater

-10.997 -1.986 -7.316 -2.764

662 Clay construction materials andrefractory construction materials

-45.700 -8.176 -2.969 -3.907

663 Mineral manufactures, n.e.s. -8.799 -3.183 -16.580 -7.728

664 Glass -14.019 -1.359 -3.862 -1.058

665 Glassware 9.345 -2.776 2.647 -4.357

666 Pottery -2.700 -2.005 -2.188 -5.276

667 Pearls, precious and semiprecious stones,unworked or worked 56.714 3.036 1.019 1.000

674 Iron and nonalloy steel flat-rolledproducts, clad, plated or coated

-13.927 -2.456 -6.009 -8.653

676 Iron and steel bars, rods, angles, shapesand sections, including sheet piling

-73.471 2.054 -3.385 2.499

678 Iron and steel wire 38.186 5.444 0.830 0.847

679 Iron and steel tubes, pipes and hollowprofiles, fittings for tubes and pipes

-16.083 -3.119 -5.147 -11.023



681 Silver, platinum and other platinumgroup metals

1.239 -6.339 0.195 -3.725

682 Copper -2.813 -2.942 -0.961 -2.654

684 Aluminum -29.338 0.017 -3.269 0.013

689 Miscellaneous nonferrous base metalsemployed in metallurgy and cermets

326.361 81.506 2.314 2.293

691 Metal structures and parts, n.e.s., of iron,steel or aluminum

-33.684 -2.947 -2.495 -5.057

692 Metal containers for storage or transport -14.462 -2.495 -3.529 -2.104

693 Wire products (excluding insulatedelectrical wiring) and fencing grills

-867.852 -20.417

-1.430 -1.592

694 Nails, screws, nuts, bolts, rivets andsimilar articles, of iron, steel, copper

-24.191 -4.295 -9.787 -13.100

695 Tools for use in the hand or in machines -6.608 -2.898 -2.312 -4.068

696 Cutlery -16.280 0.420 -2.230 0.355

697 Household equipment of base metal,n.e.s.

-10.038 -2.577 -6.792 -12.384

699 Manufactures of base metal, n.e.s. -416.348 -55.522 -3.400 -3.406

711 Steam or other vapor generating boilers,super-heated water boilers and auxiliar

3364.437 -8.865 2.748 -5.133

713 Internal combustion piston engines andparts thereof, n.e.s.

-18.411 -0.133 -4.236 -0.379

714 Engines and motors, nonelectric (otherthan steam turbines, internal combustion

2.792 -3.120 0.412 -15.202

716 Rotating electric plant and parts thereof,n.e.s.

-8.521 -1.272 -3.145 -1.324

721 Agricultural machinery (excludingtractors) and parts thereof

2.413 -2.880 1.375 -6.163

722 Tractors (other than mechanical handlingequipment)

54.234 -10.744

4.483 -5.584

723 Civil engineering and contractors' plantand equipment

-1.995 -1.900 -0.100 -2.372


-29.384 -1.654 -6.378 -2.978

726 Printing and bookbinding machinery, andparts thereof

1.983 -1.806 0.274 -1.906


-21.609 -2.434 -9.767 -3.148


72.421 2.890 2.410 1.768

731 Machine tools working by removingmetal or other material

-53.273 -9.360 -0.749 -10.736

733 Machine tools for working metal,sintered metal carbides or cermets,without rem

1.678 -2.348 1.037 -7.783

735 Parts and accessories suitable for usesolely or principally with metal working

-5.335 -2.014 -0.522 -4.187

737 Metalworking machinery (other than 84.286 2.735 3.456 1.404



machine tools) and parts thereof, n.e.s.


-6.367 -1.555 -0.263 -1.092

742 Pumps for liquids, whether or not fittedwith a measuring device; liquid elevato

-78.545 -7.563 -6.583 -8.847

743 Pumps (not for liquids), air or gas

compressors and fans; ventilating hoodsinco

-11.263 -2.468 -3.894 -4.510

744 Mechanical handling equipment, andparts thereof, n.e.s.

-25.380 -2.204 -3.114 -2.048

745 Nonelectrical machinery, tools andmechanical apparatus, and parts thereof,n.e.

16.017 2.857 0.942 1.079

746 Ball or roller bearings -1.568 -2.602 -0.341 -5.041

747 Taps, cocks, valves and similarappliances for pipes, boiler shells, tanks,etc.

-12.971 -2.723 -2.979 -6.290


64.682 0.483 2.960 0.483


-3.491 -1.644 -0.390 -1.040

751 Office machines -15.018 -1.192 -0.971 -2.564

752 Automatic data processing machines andunits thereof; magnetic or optical reader

-7.413 -1.055 -0.881 -0.793

759 Parts and accessories suitable for usesolely or principally with office machine

-13.973 -1.868 -3.000 -3.205

761 Tv receivers (including video monitors &projectors) wheth r ntincorpradiobroa

-1959.602

-450.66

9

-7.774 -7.855

763 Sound recorders or reproducers;television image and sound recorders orreproduc

-40.797 -2.710 -1.219 -4.549

764 Telecommunications equipment, n.e.s.;and parts, n.e.s., and accessories of appa

0.103 0.106 0.008 0.082

771 Electric power machinery (other thanrotating electric plant of powergenerating

-9.268 -2.400 -2.498 -3.483

772 Electrical apparatus for switching orprotecting electrical circuits or for maki

-35.893 -3.621 -2.832 -6.486

773 Equipment for distributing electricity,n.e.s.

237.766 12.596 2.503 2.401

774 Electro-diagnostic apparatus for medical,surgical, dental or veterinary science

21.816 -7.563 0.709 -2.865

775 Household type electrical andnonelectrical equipment, n.e.s.

326.717 16.210 1.843 1.719

776 Thermionic, cold cathode orphotocathode valves and tubes; diodes,transistors a

-1.016 -1.463 -0.726 -1.792

778 Electrical machinery and apparatus, n.e.s. 62.343 9.175 3.614 2.940



781 Motor cars and other motor vehiclesprincipally designed for the transport of pe

-2072.504

-337.90

0

-3.270 -3.293

784 Parts and accessories for tractors, motorcars and other motor vehicles, trucks,

19.947 3.555 2.075 1.974

785 Motorcycles (including mopeds) and

cycles, motorized and not motorized;invalid

-6.839 -0.865 -0.510 -0.512

786 Trailers and semi-trailers; other vehicles,not mechanically propelled; speciall

-0.549 -1.319 -0.039 -1.305

791 Railway vehicles (including hovertrains)and associated equipment

-17.313 -3.767 -3.015 -9.819

792 Aircraft and associated equipment;spacecraft (including satellites) andspacecr

11.890 -1.019 0.652 -0.749

793 Ships, boats (including hovercraft) andfloating structures

-23.590 -1.841 -3.547 -3.413

811 Prefabricated buildings 34.451 2.600 2.191 1.386

812 Sanitary, plumbing and heating fixturesand fittings, n.e.s.

28.356 -0.338 2.709 -0.639

813 Lighting fixtures and fittings, n.e.s. -6.553 -2.642 -1.922 -3.681

821 Furniture and parts thereof; bedding,mattresses, mattress supports, cushionsan

-1.162 -0.810 -0.326 -1.500

831 Trunks, suitcases, vanity cases, binocularand camera cases, handbags, wallets,

-12.645 -1.292 -6.105 -2.171

841 Men's or boys' coats, jackets, suits,trousers, shirts, underwear etc. Of woven

-6.645 -0.271 -3.574 -0.386

842 Women's or girls' coats, capes, jackets,

suits, trousers, dresses, skirts, under

12.558 -0.258 1.424 -0.240


-4.949 -1.248 -1.549 -1.680

844 Women's or girls' coats, capes, jackets,suits, trousers, dresses, underwear, et

-5.993 -1.355 -1.585 -1.697

845 Articles of apparel, of textile fabrics,whether or not knitted or crocheted, n.

-8.330 -1.517 -2.525 -1.848

846 Clothing accessories, of textile fabrics,whether or not knitted or crocheted (o

-10.279 -3.093 -3.789 -7.481

848 Articles of apparel and clothingaccessories of other than textile fabrics;head

-12.658 -0.844 -4.239 -1.181

851 Footwear 1.918 -0.869 0.511 -1.297

871 Optical instruments and apparatus, n.e.s. 529.430 35.179 2.378 2.283

872 Instruments and appliances, n.e.s., formedical, surgical, dental or veterinary

13.791 0.513 1.079 0.360

874 Measuring, checking, analysing andcontrolling instruments and apparatus,n.e.s.

9.571 -0.445 1.126 -0.308

881 Photographic apparatus and equipment, 8.090 -1.252 0.658 -1.266



n.e.s.

882 Photographic and cinematographicsupplies

71.718 -13.222

2.451 -5.378

884 Optical goods, n.e.s. 20.400 -0.051 2.439 -0.061

885 Watches and clocks -6.316 -3.046 -1.212 -7.641

891 Arms and ammunition -1.422 -3.815 -0.417 -5.369

892 Printed matter -5.176 -2.880 -1.452 -6.189893 Articles, n.e.s. of plastics 76.275 6.859 3.103 2.647

894 Baby carriages, toys, games and sportinggoods

-4.364 -0.171 -0.792 -0.180

895 Office and stationery supplies, n.e.s. 17.594 0.679 1.489 0.495

896 Works of art, collectors' pieces andantiques

-10.797 -3.136 -2.480 -7.189

897 Jewelry, goldsmiths' and silversmiths'wares, and other articles of precious or

-11.565 -1.119 -2.553 -2.467

898 Musical instruments, parts andaccessories thereof; records, tapes and

other sou

1.985 -1.072 0.328 -0.988

899 Miscellaneous manufactured articles,n.e.s.

-8.402 -1.875 -1.170 -3.117


-8.787 -3.180 -3.859 -9.350


7.810 -1.370 9.818 -4.439

971 Gold, nonmonetary (excluding gold oresand concentrates)

39.308 -13.527

6.787 -9.946

984 Estimate of import items valued under$251 and of other low valued itemsnonexem

40.000 8.027 4.273 3.639



Table A 6: Short-term responses of export to exchange rate:

Impulse Response Functions

sector descript Period_1 Period_2 Period_3 Period_4

1 Live animals other than animals of division

03

-0.031 -0.235 -0.518 -0.751

12 Meat, other than of bovine animals, andedible offal, fresh, chilled or frozen (

-0.006 -0.026 0.017 0.170


-0.344 -0.035 0.652 1.117

22 Milk and cream and milk products other thanbutter or cheese

0.043 0.253 0.480 0.713

34 Fish, fresh (live or dead), chilled or frozen 0.010 0.141 0.127 0.000

35 Fish, dried, sltd r in brine; smkd fish (whethr rntcookd before or durng the s

-0.101 -0.308 -0.622 -1.088

36 Crustaceans molluscs,aqutcinvrtbrtsfrsh(lve/dead) chsltd etc.; crustaceans i

0.030 0.225 0.411 0.650

37 Fish, crustaceans, molluscs and other aquaticinvertebrates, prepared or preserv

0.029 0.256 0.496 0.827

42 Rice -0.133 -0.435 -0.977 -1.601

44 Maize (not including sweet corn) unmilled -0.300 -0.822 -1.577 -2.360

45 Cereals, unmilled (other than wheat, rice,barley and maize)

0.045 -0.323 -0.584 -0.581

46 Meal and flour of wheat and flour of meslin -0.064 -0.135 -0.142 -0.286

47 Cereal meals and flours, n.e.s. 0.012 -0.078 -0.377 -0.793

48 Cereal preparations and preparations of flouror starch of fruits or vegetables

0.047 0.181 0.183 0.048

54 Vegetables, fresh, chilled, frozen or simply

preserved; roots, tubers and other

-0.034 -0.061 -0.044 -0.027


0.152 0.359 0.433 0.482

57 Fruit and nuts (not including oil nuts), fresh ordried

0.061 0.363 0.751 1.256


-0.036 -0.071 0.075 0.305

59 Fruit juices (incl. Grape must) and vegetable juices, unfermented and not contai

0.090 0.361 0.735 1.217

61 Sugars, molasses, and honey 0.054 0.254 0.430 0.66662 Sugar confectionery 0.095 0.262 0.631 0.988

71 Coffee and coffee substitutes 0.149 0.549 0.909 1.223


-0.140 -0.159 -0.160 -0.187

74 Tea and mate -0.085 -0.139 -0.144 -0.08175 Spices -0.187 -0.571 -0.941 -1.298


-0.082 -0.758 -1.653 -2.676

98 Edible products and preparations, n.e.s. -0.031 0.055 0.096 0.073

111 Nonalcoholic beverages, n.e.s. -0.050 -0.101 -0.036 0.023



112 Alcoholic beverages 0.039 0.136 0.319 0.586


0.064 -0.190 -0.495 -0.442

223 Oil seeds and oleaginous fruits, whole orbroken, of a kind used for extracting

-0.042 0.019 0.158 0.314

231 Natural rubber, balata, gutta-percha, guayule,

chicle and similar natural gums,

0.021 0.187 0.284 0.435

232 Synthetic rubber; reclaimed rubber; waste,pairings and scrap of unhardened rubb

-0.214 -0.499 -0.848 -1.211

247 Wood in the rough or roughly squared -0.247 -0.587 -1.161 -2.078

248 Wood, simply worked and railway sleepers of wood

0.046 0.228 0.602 1.034

265 Vegetable textile fibers (other than cotton and jute), raw or processed but not

0.191 0.339 0.307 0.104

266 Synthetic fibers suitable for spinning -0.196 -0.401 -0.731 -0.946

269 Worn clothing and other worn textile articles;rags

-0.002 0.002 -0.117 -0.290

273 Stone, sand and gravel -0.002 0.134 0.243 0.250274 Sulfur and unroasted iron pyrites 0.317 -0.171 -0.239 -1.678

278 Crude minerals, n.e.s. 0.389 0.682 0.941 1.503

287 Ores and concentrates of base metals, n.e.s. -0.428 -0.715 -0.954 -1.134

291 Crude animal materials, n.e.s. -0.045 -0.007 0.121 0.173

292 Crude vegetable materials, n.e.s. -0.007 -0.140 -0.146 -0.180


0.077 0.130 0.217 0.304


-0.082 -0.191 -0.378 -0.573

335 Residual petroleum products, n.e.s. andrelated materials

-0.089 -0.186 -0.328 -0.604

342 Liquefied propane and butane -0.011 -0.023 -0.106 -0.276344 Petroleum gases and other gaseous

hydrocarbons, n.e.s.-0.084 -0.118 -0.220 -0.376

431 Animal or vegetable fats and oils processed;waxes and inedible mixtures or prep

-0.327 -0.945 -1.911 -2.827

511 Hydrocarbons, n.e.s. and their halogenated,sulfonated, nitrated or nitrosated d

0.241 0.631 0.825 1.183


0.213 0.525 1.005 1.661

514 Nitrogen-function compounds 0.021 0.129 0.376 0.704

515 Organo-inorganic compounds, heterocyclic

compounds, nucleic acids and their salt

-0.174 -0.355 -0.533 -0.871


-0.044 -0.217 -0.690 -1.334

523 Metallic salts and peroxysalts of inorganicacids

-0.379 -0.882 -1.150 -1.244


0.330 0.743 1.313 2.057


-0.179 -0.271 -0.424 -0.799



541 Medicinal and pharmaceutical products, otherthan medicaments (of group 542)

-0.115 -0.096 0.046 0.346


-0.034 0.084 0.370 1.018

551 Essential oils, perfume and flavor materials -0.034 -0.188 -0.353 -0.533

553 Perfumery, cosmetics, or toilet preparations,

excluding soaps

0.046 0.163 0.186 0.209

554 Soap, cleansing and polishing preparations -0.047 0.044 0.205 0.597

571 Polymers of ethylene, in primary forms 0.210 0.608 1.160 1.827


0.001 -0.024 -0.053 -0.089


579 Waste, parings and scrap, of plastics -0.114 -0.402 -1.028 -1.846

581 Tubes, pipes and hoses of plastics 0.015 -0.023 0.015 0.138

582 Plates, sheets, film, foil and strip of plastics 0.001 0.069 0.090 0.209

583 Monofilament with a cross-sectionaldimension exceeding 1 mm, rods, sticks and p

0.276 -0.006 -0.532 -1.635

591 Insecticides, fungicides, herbicides, plantgrowth regulators, etc., disinfectan 0.056 0.304 0.389 0.370


-0.316 -0.769 -1.362 -2.094

593 Explosives and pyrotechnic products -0.193 -0.307 -0.057 0.644

597 Prepared additives for mineral oils etc.;liquids for hydraulic transmissions; a

-0.482 -0.754 -0.883 -0.954


611 Leather 0.031 0.071 0.124 0.094

612 Manufactures of leather or compositionleather, n.e.s.; saddlery and harness

0.099 0.280 0.467 0.721

613 Furskins, tanned or dressed (including pieces

or cuttings), assembled or unassem

0.319 1.186 3.001 5.497

621 Materials of rubber, including pastes, plates,sheets, rods, thread, tubes, etc.

0.252 0.734 1.385 2.192

625 Rubber tires, interchangeable tire treads, tireflaps and inner tubes for wheels

-0.094 -0.161 -0.361 -0.649

629 Articles of rubber, n.e.s. 0.046 0.207 0.230 0.246

633 Cork manufactures 0.109 0.663 1.201 1.869

634 Veneers, plywood, particle board, and otherwood, worked, n.e.s.

-0.291 -0.647 -1.061 -1.568

635 Wood manufactures, n.e.s. 0.175 0.370 0.608 0.976

641 Paper and paperboard 0.008 -0.096 -0.404 -0.808

642 Paper and paperboard, cut to size or shape,and articles of paper or paperboard -0.152 -0.434 -0.651 -0.814

651 Textile yarn 0.043 0.053 -0.045 -0.116

652 Cotton fabrics, woven (not including narrowor special fabrics)

-0.104 0.005 0.028 0.002

653 Woven fabrics of manmade textile materials(not including narrow or special fabr

-0.081 -0.150 -0.152 -0.167

654 Woven fabrics of textile materials, other thancotton or manmade fibers and narr

-0.090 -0.177 -0.227 -0.224



655 Knitted or crocheted fabrics (includingtubular knit fabrics, n.e.s., pile fabri

-0.048 -0.072 -0.178 -0.228

656 Tulles, lace, embroidery, ribbons, trimmingsand other small wares

-0.113 -0.150 -0.067 0.106


0.107 0.331 0.622 1.014

658 Made-up articles, wholly or chiefly of textilematerials, n.e.s.

0.011 -0.050 -0.038 0.116

659 Floor coverings, etc. 0.197 0.497 0.693 0.758

661 Lime, cement, and fabricated constructionmaterials, except glass and clay mater

0.003 -0.011 -0.067 -0.155

662 Clay construction materials and refractoryconstruction materials

0.104 0.271 0.435 0.800

663 Mineral manufactures, n.e.s. -0.127 -0.233 -0.458 -0.845

664 Glass 0.071 0.152 0.165 0.204

665 Glassware 0.046 0.019 -0.108 -0.338

666 Pottery 0.155 0.506 0.751 0.911

667 Pearls, precious and semiprecious stones,unworked or worked -0.052 -0.217 -0.570 -0.968

674 Iron and nonalloy steel flat-rolled products,clad, plated or coated

-0.126 -0.130 0.030 0.294

676 Iron and steel bars, rods, angles, shapes andsections, including sheet piling

0.251 0.595 1.026 1.222

678 Iron and steel wire -0.064 -0.209 -0.426 -0.664

679 Iron and steel tubes, pipes and hollowprofiles, fittings for tubes and pipes

0.105 0.306 0.438 0.506

681 Silver, platinum and other platinum groupmetals

0.353 1.225 2.489 4.421

682 Copper 0.417 0.977 1.327 1.576

684 Aluminum 0.016 -0.015 -0.283 -0.700689 Miscellaneous nonferrous base metals

employed in metallurgy and cermets0.178 0.225 0.254 0.227

691 Metal structures and parts, n.e.s., of iron, steelor aluminum

0.083 0.291 0.522 0.801

692 Metal containers for storage or transport -0.088 -0.240 -0.410 -0.562693 Wire products (excluding insulated electrical

wiring) and fencing grills-0.231 -0.618 -1.315 -2.237

694 Nails, screws, nuts, bolts, rivets and similararticles, of iron, steel, copper

-0.015 -0.083 -0.044 0.097

695 Tools for use in the hand or in machines 0.067 0.305 0.530 0.870

696 Cutlery 0.099 0.292 0.458 0.489697 Household equipment of base metal, n.e.s. 0.151 0.514 0.835 1.103

699 Manufactures of base metal, n.e.s. -0.026 0.023 0.034 -0.077

711 Steam or other vapor generating boilers,super-heated water boilers and auxiliar

-0.154 -0.403 -0.904 -1.466

713 Internal combustion piston engines and partsthereof, n.e.s.

0.071 -0.085 -0.393 -1.201

714 Engines and motors, nonelectric (other thansteam turbines, internal combustion

-0.027 0.169 0.135 -0.052



716 Rotating electric plant and parts thereof, n.e.s. 0.018 0.045 0.031 -0.025

721 Agricultural machinery (excluding tractors)and parts thereof

0.132 0.401 0.800 1.078

722 Tractors (other than mechanical handlingequipment)

-0.031 -0.044 0.007 0.228

723 Civil engineering and contractors' plant and

equipment

-0.014 -0.151 -0.311 -0.369


-0.067 0.239 0.710 1.584

726 Printing and bookbinding machinery, andparts thereof

-0.066 -0.175 -0.230 -0.246


0.059 0.251 0.498 0.777


-0.058 -0.297 -0.685 -1.280

731 Machine tools working by removing metal orother material

-0.040 -0.174 -0.449 -0.806

733 Machine tools for working metal, sinteredmetal carbides or cermets, without rem 0.036 0.198 0.418 0.788

735 Parts and accessories suitable for use solely orprincipally with metal working

0.019 0.027 0.088 0.178

737 Metalworking machinery (other than machinetools) and parts thereof, n.e.s.

-0.087 -0.316 -0.618 -0.991


-0.109 -0.135 -0.167 -0.128

742 Pumps for liquids, whether or not fitted with ameasuring device; liquid elevato

0.113 0.438 0.953 1.472

743 Pumps (not for liquids), air or gascompressors and fans; ventilating hoods inco

0.022 -0.029 -0.018 0.145

744 Mechanical handling equipment, and partsthereof, n.e.s.

0.154 0.405 0.599 1.051

745 Nonelectrical machinery, tools andmechanical apparatus, and parts thereof, n.e.

0.070 0.108 0.233 0.390

746 Ball or roller bearings -0.251 -0.646 -1.196 -1.613

747 Taps, cocks, valves and similar appliances forpipes, boiler shells, tanks, etc.

0.012 0.013 0.069 0.211


0.005 0.140 0.384 0.699


-0.007 0.182 0.465 0.665

751 Office machines 0.184 0.482 0.654 0.845

752 Automatic data processing machines and unitsthereof; magnetic or optical reader

0.038 0.071 0.155 0.203

759 Parts and accessories suitable for use solely orprincipally with office machine

-0.028 0.049 0.179 0.298

761 Tv receivers (including video monitors &projectors) wheth r ntincorpradiobroa

0.392 1.088 2.704 3.746

763 Sound recorders or reproducers; televisionimage and sound recorders or reproduc

0.085 0.106 0.182 0.247



764 Telecommunications equipment, n.e.s.; andparts, n.e.s., and accessories of appa

0.040 0.273 0.484 0.673

771 Electric power machinery (other than rotatingelectric plant of power generating

-0.034 -0.050 0.002 0.070

772 Electrical apparatus for switching orprotecting electrical circuits or for maki

0.010 0.001 -0.172 -0.297

773 Equipment for distributing electricity, n.e.s. -0.180 -0.391 -0.696 -1.094774 Electro-diagnostic apparatus for medical,

surgical, dental or veterinary science0.299 0.387 0.341 0.086

775 Household type electrical and nonelectricalequipment, n.e.s.

-0.154 -0.366 -0.764 -1.362

776 Thermionic, cold cathode or photocathodevalves and tubes; diodes, transistors a

-0.016 -0.216 -0.537 -0.954

778 Electrical machinery and apparatus, n.e.s. 0.024 0.280 0.504 0.774

781 Motor cars and other motor vehiclesprincipally designed for the transport of pe

0.187 0.466 0.857 1.279

784 Parts and accessories for tractors, motor cars

and other motor vehicles, trucks,

0.010 0.054 0.075 0.157

785 Motorcycles (including mopeds) and cycles,motorized and not motorized; invalid

-0.177 -0.384 -0.567 -0.733

786 Trailers and semi-trailers; other vehicles, notmechanically propelled; speciall

-0.126 -0.241 -0.490 -0.919

791 Railway vehicles (including hovertrains) andassociated equipment

0.576 1.355 2.349 3.830

792 Aircraft and associated equipment; spacecraft(including satellites) and spacecr

-0.216 -0.486 -0.770 -1.134

793 Ships, boats (including hovercraft) andfloating structures

-0.282 -0.605 -0.723 -1.013

811 Prefabricated buildings -0.023 -0.042 -0.248 -0.317

812 Sanitary, plumbing and heating fixtures andfittings, n.e.s.

0.029 0.091 0.170 0.231

813 Lighting fixtures and fittings, n.e.s. 0.034 0.238 0.553 0.920

821 Furniture and parts thereof; bedding,mattresses, mattress supports, cushions an

0.152 0.514 0.797 1.124

831 Trunks, suitcases, vanity cases, binocular andcamera cases, handbags, wallets,

-0.109 -0.125 -0.203 -0.300

841 Men's or boys' coats, jackets, suits, trousers,shirts, underwear etc. Of woven

0.165 0.353 0.567 0.879

842 Women's or girls' coats, capes, jackets, suits,trousers, dresses, skirts, under

0.178 0.447 0.637 0.764


0.093 0.246 0.263 0.229

844 Women's or girls' coats, capes, jackets, suits,trousers, dresses, underwear, et

0.040 0.218 0.372 0.549

845 Articles of apparel, of textile fabrics, whetheror not knitted or crocheted, n.

0.022 0.206 0.375 0.552

846 Clothing accessories, of textile fabrics,whether or not knitted or crocheted (o

-0.261 -0.627 -0.971 -1.293

848 Articles of apparel and clothing accessories of 0.067 0.268 0.435 0.611



other than textile fabrics; head

851 Footwear 0.021 0.082 -0.053 -0.225

871 Optical instruments and apparatus, n.e.s. -0.365 -1.178 -2.231 -3.274

872 Instruments and appliances, n.e.s., formedical, surgical, dental or veterinary

0.069 0.047 -0.031 -0.116

874 Measuring, checking, analysing and

controlling instruments and apparatus, n.e.s.

-0.126 -0.232 -0.265 -0.081

881 Photographic apparatus and equipment, n.e.s. 0.115 0.216 0.691 1.103

882 Photographic and cinematographic supplies 0.183 0.293 0.181 0.102

884 Optical goods, n.e.s. -0.245 -0.514 -0.708 -0.837

885 Watches and clocks -0.037 -0.094 -0.117 -0.047

891 Arms and ammunition -0.032 -0.104 -0.238 -0.457

892 Printed matter 0.001 -0.097 -0.042 0.189

893 Articles, n.e.s. of plastics 0.107 0.359 0.525 0.661

894 Baby carriages, toys, games and sportinggoods

-0.084 -0.095 0.009 0.171

895 Office and stationery supplies, n.e.s. -0.103 -0.111 0.003 0.074

896 Works of art, collectors' pieces and antiques -0.039 -0.164 -0.208 -0.288897 Jewelry, goldsmiths' and silversmiths' wares,

and other articles of precious or0.033 0.135 0.286 0.529

898 Musical instruments, parts and accessoriesthereof; records, tapes and other sou

0.090 0.289 0.568 0.908

899 Miscellaneous manufactured articles, n.e.s. 0.081 0.259 0.543 0.875


-0.204 -0.493 -0.843 -1.166


-0.108 -0.104 -0.294 -0.432

971 Gold, nonmonetary (excluding gold ores andconcentrates)

0.175 0.716 1.238 1.836

984 Estimate of import items valued under $251and of other low valued items nonexem

-0.006 0.096 0.201 0.353

exchange rate report - v2

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