The Effect of Exchange Rate Volatility on Vietnam's Import and Export Structure

Abstract

This study provides a comprehensive and detailed examination of the impact of exchange rate volatility on the import and export structure of Vietnam over the period from 2010 to 2023. By systematically collecting and analyzing a wide range of economic data—including exchange rate fluctuations, sectoral import and export volumes, product categories, and market distribution—this research aims to uncover the complex dynamics between currency value changes and Vietnam's trade patterns. Exchange rate volatility, characterized by frequent and sometimes unpredictable fluctuations in the value of the Vietnamese dong against major currencies, has profound implications for the competitiveness of Vietnamese goods in global markets, as well as for the cost structure of imported inputs. Our empirical analysis reveals that appreciation of the Vietnamese dong typically results in a decline in export volumes, particularly for price-sensitive goods, while simultaneously making imports more affordable, which benefits industries reliant on foreign inputs or consumer imports. Conversely, depreciation tends to boost export competitiveness by lowering relative prices but increases the cost burden on import-dependent sectors. Importantly, the sensitivity to exchange rate fluctuations is not uniform across all industries; manufacturing sectors with high foreign input content react differently compared to agricultural or raw material exports. Additionally, shifts in exchange rates influence not only the product mix but also the geographic distribution of trade, affecting Vietnam's trade relationships with key partners across Asia, Europe, and North America. This paper further discusses the policy implications of these findings, emphasizing the need for more robust exchange rate risk management strategies and trade diversification policies to enhance economic resilience. By optimizing the import-export structure in response to currency volatility, Vietnam can better sustain its economic growth and integration into global value chains. The study contributes valuable empirical evidence to the literature on emerging market trade dynamics and provides practical guidance for policymakers aiming to navigate the challenges posed by fluctuating exchange rates.