This paper aims at examining impacts of oil shocks on Vietnam’s balance of trade and causal relationship between the balance of trade and relevant macro factors. Bound testing approach and ARDL are applied to data from Quarter I of 1999 to Quarter IV of 2011. | 66 | Nguyễn Khắc Quốc Bảo | 66 - 80 Impacts of Oil Shocks on Vietnam’s Trade Balance and Recommendations NGUYỄN KHẮC QUỐC BẢO University of Economics HCMC nguyenbao@ ARTICLE INFO ABSTRACT Article history: Received: Aug. 23, 2013 Received in revised form Oct. 03, 2013 Accepted: Dec 31, 2013 This paper aims at examining impacts of oil shocks on Vietnam’s balance of trade and causal relationship between the balance of trade and relevant macro factors. Bound testing approach and ARDL are applied to data from Quarter I of 1999 to Quarter IV of 2011. The results demonstrate a negative relationship between oil price, exchange rate and trade balance in Vietnam. More specifically, a onepercent increase in the oil prices and exchange rate causes the trade balance to fall by and respectively in the long run. In the short run, however, international exchange rates and oil pricesare positively corrrelatedwith Vietnam’s trade balance. These findings allow some recommendations and suggestions for policy makers in an effort to reduce negative effects of oil shocks on Vietnam’s trade balance. Keywords: oil price, exchange rate, trade balance, ARDL. Impacts of Oil Shocks on Vietnam’s Trade Balance JED January 2014| 67 1. INTRODUCTION Oil shocks in the 1970s and their accompanied consequences brought high inflation rates, increased unemployment rate, and seriously decreased outputs to world economy. This fact made the oil price a center of attention, and many researches have been conducted to examine its effects on various macroeconomic factors such as growth, inflation, exchange rate, labor market, money market, and stock market, etc. Many researches said that the oil shock might cause an economic recession. Hamilton (2009) confirmed that sharp increase in oil price in the period between July 2007 and July 2008 was an important factor contributing to the global economic recession that started from the . Moreover, recent researches have .
