The Application of Standard Two-Country Model to Analyze the Role of Vehicle Currency and the Empirical Evidence from Vietnam-Eurozone Trade
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Gia Bao, Ho Hoang [1] ; Le, Hoang Phong [2]
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[1] Department of Finance and Accounting Management, Ho Chi Minh City University of Law
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[2] University of Economics Ho Chi Minh City
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- Localización: Estudios de economía aplicada, ISSN 1133-3197, ISSN-e 1697-5731, Vol. 40, Nº 2, 2022 (Ejemplar dedicado a: Systematic Reviews and Bibliometric-Analyses in Applied Economics Literature)
- Idioma: inglés
- Texto completo no disponible (Saber más ...)
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Resumen
The standard two-country model, also referred to as the imperfect substitutes model of international trade, have been the framework of virtually all J-curve research. As the aforesaid model only mentions the bilateral exchange rate between the currencies of the home and the foreign countries, many studies employing it neglect the crucial role of vehicle currency, which cannot detect useful findings especially in the circumstance that the global trade is dominated by only a few currencies such as USD. Some studies utilized that model to explore the impacts of vehicle currencies on trade balance but presumably lacked theoretical basis. This paper is the first to provide the theoretical ground for the usage of standard two-country model to examine the role vehicle currency. In addition, empirical evidence regarding the asymmetric effects of the vehicle currency exchange rate USD/VND and bilateral exchange rate EUR/VND on Vietnam’s trade balance with the whole Eurozone is also reported.
