Effect of monetary policy to trade balance on open developing country: a case of Vietnam

Abstract

Using monthly data collected from IMF, ADB, State bank of Vietnam from 2003 to 2012, with the use of the Structural Vector Autoregression model (SVAR), we examine the effect of the shock from Monetary Policy to the Trade Balance of Vietnam in the period 2003 – 2012. The results of the paper suggest that Trade Balance was negatively damaged by the shock of increasing interest rate, money supply and also the effect of curve J with 2-month lag. The authors also learnt that Vietnam was strongly affected by USD exchange rate and global oil price.