The role of vehicle currency in affecting trade balance empirical evidence from the trade of china and the association of south east asian nations with the european union

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY HO HOANG GIA BAO THE ROLE OF VEHICLE CURRENCY IN AFFECTING TRADE BALANCE: EMPIRICAL EVIDENCE FROM THE TRADE OF CHINA AND THE ASSOCIATION OF SOUTH EAST ASIAN NATIONS WITH THE EUROPEAN UNION DOCTORAL DISSERTATION Ho Chi Minh City – 2023 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY HO HOANG GIA BAO THE ROLE OF VEHICLE CURRENCY IN AFFECTING TRADE BALANCE: EMPIRICAL EVIDENCE FROM THE TRADE OF CHINA AND THE ASSOCIATION OF SOUTH EAST ASIAN NATIONS WITH THE EUROPEAN UNION MAJOR: FINANCE MAJOR ID: 9340201 DOCTORAL DISSERTATION ACADEMIC SUPERVISORS: ASSOC PROF DR TRAN THI HAI LY DR DINH THI THU HONG Ho Chi Minh City – 2023 STATEMENT OF AUTHENTICATION I confirm that this PhD dissertation is my original research This dissertation is only used for the PhD degree at the University of Economics Ho Chi Minh City (UEH), and no part of it has been submitted to any other university or organization to obtain any other degree All the references used in this dissertation are properly cited Ho Chi Minh City, 31 Jan 2023 Ho Hoang Gia Bao ACKNOWLEDGMENT I am much grateful to Assoc Prof Dr Tran Thi Hai Ly and Dr Dinh Thi Thu Hong for their supervision and support I am much grateful to Prof Dr Tran Ngoc Tho, Assoc Prof Dr Phung Duc Nam, Dr Vu Viet Quang, Assoc Prof Dr Ha Thi Thieu Dao, Prof Dr Aaro Hazak, Assoc Prof Dr Le Thi Phuong Vy, Dr Nguyen Hoang Thuy Bich Tram, Dr Le Thi Hong Minh, Dr Tran Thi Tuan Anh, and other professors for their valuable comments I am much grateful to the anonymous reviewers for their valuable comments I am much grateful to my family and all the people who give me encouragement and support to conduct this PhD dissertation Ho Chi Minh City, 31 Jan 2023 Ho Hoang Gia Bao CONTENT Page CHAPTER 1: INTRODUTION 1.1 Research background and motivations 1.2 Research objectives 10 1.3 Research questions 11 1.4 Research scope 11 1.5 The contributions of the dissertation 11 1.6 The structure of the dissertation 15 1.7 The summary of Chapter 17 CHAPTER 2: LITERATURE REVIEW 18 2.1 The impacts of exchange rates on trade balances 18 2.1.1 The imperfect substitutes models 19 2.1.2 The Marshall-Lerner condition 23 2.1.3 The J-curve effect 26 2.1.4 The application of the method proposed by Rose and Yellen (1989) to identify the J-curve effect and the Marshall-Lerner condition 30 2.1.5 The review of empirical studies about the Marshall Lerner condition 33 2.1.6 The review of empirical studies about the J-curve effect 35 2.2 The dominance currency paradigm 45 2.3 The choice of invoicing currencies 48 2.4 Research gaps 50 2.5 Research hypotheses 51 2.6 The summary of Chapter 54 CHAPTER 3: METHODOLOGY 55 3.1 Explaining why the standard two-country model can be used for inspecting the role of a vehicle currency 55 3.2 Empirical models and the computation of the variables 64 3.2.1 The empirical models and the computation of the variables for the Research Objective 64 3.2.2 The empirical models and the computation of the variables for the Research Objective 68 3.3 Data description 73 3.4 Estimation method 75 3.4.1 Reasons to select the NARDL method 75 3.4.2 The estimation procedure 76 3.5 The summary of Chapter 80 CHAPTER 4: EMPIRICAL RESULTS FROM CHINA-EU TRADE 81 4.1 The trade between China and the whole EU 81 4.2 The trade between China and each EU member and the UK 90 4.3 The trade between China and the EU at industry level 107 4.4 The summary of Chapter 121 CHAPTER 5: EMPIRICAL RESULTS FROM ASEAN-EU TRADE 123 5.1 The trade between the entire ASEAN and the whole EU 123 5.2 The trade between each ASEAN member and the whole EU 132 5.3 The trade between the entire ASEAN and the whole EU at industry level 143 5.4 The summary of Chapter 158 CHAPTER 6: CONCLUSION 160 6.1 The summary of the findings 160 6.2 The summary of contributions and policy implications 162 LIST OF PUBLICATION 166 REFERENCES 167 APPENDIX 183 LIST OF ABBREVIATIONS ASEAN Association of South East Asian Nations B-G Breusch-Godfrey test B-P Breusch-Pagan test CNY Chinese yuan CUSUM Cumulative Sum of Recursive Residuals CUSUMSQ Cumulative Sum of Square of Recursive Residuals CZK Czech koruna EU The European Union EU-27 The European Union with 27 member countries EU-28 The European Union with 28 member countries EUR Euro GBP British pound HUF Hungarian forint IMF International Monetary Fund JPY Japanese yen MYR Malaysian ringgit NARDL Nonlinear Autoregressive Distributed Lags PLN Polish złoty RR Ramsey RESET test UK The United Kingdom UNCTAD United Nations Conference on Trade and Development US The United States of America USD The US dollar VND Vietnamese dong LIST OF TABLES Page Table 1.1: Top partners that the EU imported from in 2020 Table 1.2: Top partners that the EU exported to in 2020 Table 2.1: Examples of some studies at aggregate, bilateral, and industry levels for several selected countries 38 Table 2.2: Examples of some published papers that accounted for the asymmetric impacts of exchange rates on trade balances 41 Table 3.1: The description of notations 56 Table 3.2: Data sources for computing the variables 73 Table 4.1: The descriptive statistics of the variables in China’s trade with the whole EU28 81 Table 4.2: The results of unit-root tests for the variables in China’s trade with the whole EU-28 82 Table 4.3: The impacts of the real effective exchange rate on China’s trade balance with the whole EU-28 83 Table 4.4: The impacts of the vehicle currency USD’s exchange rate on China’s trade balance with the whole EU-28 86 Table 4.5: The impacts of the real effective exchange rate on China’s trade balance with the whole EU-27 88 Table 4.6: The impacts of the vehicle currency USD’s exchange rate on China’s trade balance with the whole EU-27 89 Table 4.7: The long-run and short-run impacts of exchange rates on China’s trade balance with each EU country and the UK 91 Table 4.8: The share that each country occupies in China’s total trade with the EU-28 104 Table 4.9: The cases with long-run and/or short-run asymmetries in China’s trade with each EU member and the UK 105 Table 4.10: Comparing the performance of the BERi and VERi models in terms of significant exchange rates’ coefficients 107 Table 4.11: The descriptive statistics of the variables in China’s trade with the EU-28 at the industry level 108 Table 4.12: The impacts of exchange rates on China’s trade balance with the EU-28 at the industry level 111 Table 4.13: The summary of exchange rates’ long-run impacts on China’s trade balance with the EU-28 at the industry level 118 Table 4.14: The list of industries traded between China and the EU-28 having long-run and/or short-run asymmetries 119 Table 4.15: Comparing the performance of the REERj and VERj models in terms of significant exchange rates’ coefficients 120 Table 5.1: The descriptive statistics of the variables in the trade between the entire ASEAN and the whole EU-28 123 Table 5.2: The results of unit-root tests for the variables in the trade between the entire ASEAN and the whole EU-28 124 186 Hwang et al Product differentiation; - Producer currency pricing is utilized (2019) economic volatility; when the product is differentiated banking system; - Currencies having low transaction transaction cost cost and belonging to the countries with low economic volatility and developed banking system will be chosen Liu & Lu (2019) Financial market - Exporters in the countries with less development; exchange developed financial markets are more rate risk likely to select the currencies of the countries with more developed financial markets - High exchange rate risk boosts the usage of vehicle currency pricing Amiti et al (2022) Firm size; rivals; global - Producer currency pricing is used value chains when companies are small and not rely on imported materials - Local currency pricing or vehicle currency pricing is used when companies are big and strongly rely on imported materials - Bigger companies select the local currency pricing to synthesize with the currency of the rivals - The higher level of globalization and reliance on the global value chains foster the employment of USD 187 Arioldi et al Bargaining power; trade - Parties with high bargaining power (2022) network have more advantages in negotiating the invoicing currencies - Producer currency pricing is used when the importers’ trade possibilities are worsened by trade network asymmetries Table A2: The results of unit-root tests for China’s trade with each EU members and the UK Variables ADF PP Variables ADF PP lnCTB1 -4.613*** -5.506*** lnCTB1 -12.88*** -10.682*** lnCTB2 -2.427 -2.639* lnCTB2 -8.222*** -9.352*** lnCTB3 -2.484 -3.286** lnCTB3 -8.545*** -11.777*** lnCTB4 -4.195*** -5.375*** lnCTB4 -10.82*** -12.164*** lnCTB5 -1.629 -1.883 lnCTB5 -8.365*** -13.459*** lnCTB6 -1.616 -2.251 lnCTB6 -7.956*** -11.964*** lnCTB7 -2.456 -2.635* lnCTB7 -8.189*** -9.486*** lnCTB8 -3.560*** -5.175*** lnCTB8 -6.806*** lnCTB9 -2.415 -2.462 lnCTB9 -7.97*** -8.836*** lnCTB10 -2.123 -2.790* lnCTB10 -10.18*** -12.743*** lnCTB11 -2.217 -2.423 lnCTB11 -9.102*** -9.310*** lnCTB12 -2.895** -4.249*** lnCTB12 -9.113*** -13.441*** lnCTB13 -1.072 -1.405 lnCTB13 -11.01*** -11.471*** lnCTB14 -0.976 -1.171 lnCTB14 -8.066*** -8.989*** -12.74*** 188 lnCTB15 -1.753 -1.960 lnCTB15 -8.112*** -9.692*** lnCTB16 -2.263 -5.377*** lnCTB16 -9.936*** -19.005*** lnCTB17 -2.603* -5.467*** lnCTB17 -8.696*** -13.161*** lnCTB18 -2.496 -2.689* lnCTB18 -8.859*** -8.520*** lnCTB19 -2.201 -3.238** lnCTB19 -9.223*** -14.398*** lnCTB20 -4.162*** -4.344*** lnCTB20 -12.42*** -9.314*** lnCTB21 -8.051*** -8.011*** lnCTB21 -12.49*** -11.170*** lnCTB22 -1.998 -2.682* lnCTB22 -6.883*** -9.935*** lnCTB23 -2.207 -2.603* lnCTB23 -6.948*** -10.904*** lnCTB24 -2.828 -3.630*** lnCTB24 -8.921*** -12.711*** lnCTB25 -3.264** -4.099*** lnCTB25 -7.634*** -12.364*** lnCTB26 -2.308 -3.404** lnCTB26 -7.935*** -11.761*** lnCTB27 -2.973** -2.403 lnCTB27 -7.809*** -11.148*** lnCTB28 -2.415 -3.131** lnCTB28 -11.28*** -10.623*** lnYF1 -0.468 -0.550 lnYF1 -3.49*** -5.105*** lnYF2 -0.824 -1.198 lnYF2 -3.67*** -4.518*** 0.126 lnYF3 -4.49*** -5.436*** -2.229 lnYF4 -16.06*** -8.643*** lnYF5 -9.851*** -13.674*** lnYF3 lnYF4 lnYF5 -0.089 -2.090 -2.957** -4.11*** lnYF6 0.201 -0.285 lnYF6 -7.223*** -11.293*** lnYF7 -2.396 -1.731 lnYF7 -3.948*** -4.081*** lnYF8 -2.314 -3.064** lnYF8 -8.419*** -16.096*** lnYF9 -2.394 -2.552 lnYF9 -19.26*** -8.339*** lnYF10 -0.304 -0.803 lnYF10 -5.955*** -22.160*** 189 lnYF11 -2.186 -2.400 lnYF11 -33.46*** -8.385*** lnYF12 -0.918 -1.114 lnYF12 -4.566*** -4.488*** lnYF13 -0.326 -0.434 lnYF13 -3.917*** -5.219*** -1.899 lnYF14 -9.464*** -16.397*** lnYF14 -1.219 lnYF15 -3.35** -3.958*** lnYF15 -10.19*** -10.599*** lnYF16 -4.707*** -4.560*** lnYF16 -20.93*** -8.737*** lnYF17 -1.537 -1.880 lnYF17 -14.23*** -9.413*** lnYF18 -1.758 -2.408 lnYF18 -7.995*** -14.159*** lnYF19 -2.622* -3.072 lnYF19 -5.470*** -33.727*** lnYF20 -0.226 -0.555 lnYF20 -4.215*** -5.843*** lnYF21 -1.093 lnYF21 -3.176*** -3.605*** lnYF22 -2.134 -2.492 lnYF22 -3.744*** -5.469*** lnYF23 -4.215*** -4.117*** lnYF23 -34.12*** -8.181*** lnYF24 -2.087 -2.681* lnYF24 -10.58*** -10.145*** lnYF25 -1.613 -2.204 lnYF25 -9.018*** -14.757*** lnYF26 -1.263 -3.013** lnYF26 -7.216*** -25.191*** lnYF27 -1.857 -2.494 lnYF27 -6.304*** -17.775*** lnYF28 -2.250 -3.818*** lnYF28 -7.231*** -23.320*** POS_BER1 -2.928** -2.561 POS_BER1 -6.369*** -9.466*** POS_BER2 -2.832* -2.477 POS_BER2 -6.312*** -9.411*** POS_BER3 -4.224*** -3.673*** POS_BER3 -5.974*** -9.529*** POS_BER4 -2.875** -2.469 POS_BER4 -6.375*** -10.249*** POS_BER5 -3.741*** -3.301** POS_BER5 -5.734*** -9.310*** POS_BER6 -2.004 -1.766 POS_BER6 -6.860*** -9.065*** -1.149 190 POS_BER7 -2.813* -2.463 POS_BER7 -6.190*** -9.484*** POS_BER8 -0.699 -0.689 POS_BER8 -5.782*** -8.462*** POS_BER9 -3.134** -2.729* POS_BER9 -6.248*** -9.662*** POS_BER10 -3.091** -2.720* POS_BER10 -6.154*** -9.317*** POS_BER11 -2.892** -2.538 POS_BER11 -6.319*** -9.358*** POS_BER12 -7.596*** -5.781*** POS_BER12 -6.319*** -8.331*** POS_BER13 -2.281 -2.032 POS_BER13 -6.256*** -9.122*** POS_BER14 -3.447*** -3.009** POS_BER14 -6.001*** -9.524*** POS_BER15 -3.128** -2.756* POS_BER15 -6.046*** -9.266*** POS_BER16 -1.243 -1.054 POS_BER16 -6.421*** -9.313*** POS_BER17 0.051 0.084 POS_BER17 -5.887*** -8.300*** POS_BER18 -3.093** -2.703* POS_BER18 -6.220*** -9.522*** POS_BER19 -2.239 -1.944 POS_BER19 -6.643*** -9.664*** POS_BER20 -2.885** -2.526 POS_BER20 -6.297*** -9.436*** POS_BER21 -1.914 -1.670 POS_BER21 -5.730*** -9.219*** -2.769* POS_BER22 -6.040*** POS_BER22 -3.173** -9.566*** POS_BER23 -1.818 -1.626 POS_BER23 -5.700*** -8.717*** POS_BER24 -0.986 -0.961 POS_BER24 -5.866*** -8.294*** POS_BER25 -1.283 -1.261 POS_BER25 -5.884*** -8.376*** POS_BER26 -3.415** -2.972** POS_BER26 -6.009*** POS_BER27 -2.005 -1.825 POS_BER27 -5.689*** -8.358*** POS_BER28 -1.843 -1.648 POS_BER28 -6.640*** -9.171*** NEG_BER1 -0.026 -0.355 NEG_BER1 -4.913*** -7.589*** NEG_BER2 0.068 -0.256 NEG_BER2 -4.892*** -7.539*** -9.692*** 191 NEG_BER3 0.227 0.083 NEG_BER3 -4.872*** -7.568*** NEG_BER4 0.306 0.258 NEG_BER4 -4.812*** -7.136*** NEG_BER5 -0.472 -0.596 NEG_BER5 -5.452*** -8.919*** NEG_BER6 0.444 0.467 NEG_BER6 -4.936*** -6.904*** NEG_BER7 0.197 -0.146 NEG_BER7 -4.870*** -7.976*** NEG_BER8 0.255 -0.022 NEG_BER8 -4.807*** -7.591*** NEG_BER9 -0.018 -0.364 NEG_BER9 -4.994*** -7.571*** NEG_BER10 0.046 -0.292 NEG_BER10 -4.975*** -7.641*** NEG_BER11 0.043 -0.276 NEG_BER11 -4.933*** -7.376*** NEG_BER12 0.611 0.176 NEG_BER12 -5.286*** -8.116*** NEG_BER13 0.182 0.142 NEG_BER13 -4.845*** -6.333*** NEG_BER14 0.340 0.114 NEG_BER14 -4.917*** -7.374*** NEG_BER15 0.128 -0.198 NEG_BER15 -4.923*** -7.468*** NEG_BER16 0.870 0.848 NEG_BER16 -4.841*** -8.272*** NEG_BER17 0.009 0.160 NEG_BER17 -5.193*** -6.938*** NEG_BER18 0.047 -0.295 NEG_BER18 -4.969*** -7.549*** NEG_BER19 -0.522 -0.554 NEG_BER19 -5.567*** -8.542*** NEG_BER20 0.225 -0.100 NEG_BER20 -5.049*** -7.446*** NEG_BER21 -0.061 0.086 NEG_BER21 -5.565*** -6.444*** NEG_BER22 0.263 -0.038 NEG_BER22 -5.041*** -7.840*** NEG_BER23 0.616 0.715 NEG_BER23 -4.632*** -6.828*** NEG_BER24 0.602 0.361 NEG_BER24 -4.916*** -7.176*** NEG_BER25 0.226 -0.072 NEG_BER25 -4.940*** -7.690*** NEG_BER26 0.074 -0.207 NEG_BER26 -5.065*** -7.911*** 192 NEG_BER27 0.225 -0.129 NEG_BER27 -4.997*** -6.537*** NEG_BER28 -0.198 -0.162 NEG_BER28 -5.644*** -6.723*** Notes: The symbol “” represents the first-difference operator The symbols ***, **, and * indicate that the test statistics are significant at 1%, 5%, and 10% levels The tests include constants and no trends Table A3: The results of unit-root tests for China’s trade with the EU-28 at the industry level Variables ADF PP Variables ADF PP lnCTB1 -1.885 -2.521 lnCTB1 -6.994*** -10.794*** lnCTB2 -2.413 -3.082** lnCTB2 -6.478*** -9.754*** lnCTB3 -1.973 -2.314 lnCTB3 -6.962*** -9.784*** lnCTB4 -0.699 -0.928 lnCTB4 -7.683*** -10.692*** lnCTB5 -2.662* -2.932** lnCTB5 -10.482*** -9.644*** lnCTB6 -2.294 -2.940** lnCTB6 -5.469*** -11.232*** lnCTB7 -1.476 -2.106 lnCTB7 -7.577*** -12.033*** lnCTB8 -1.231 -1.524 lnCTB8 -10.255*** -11.124*** lnCTB9 0.018 -1.330 lnCTB9 -6.522*** -23.240*** lnCTB10 -1.015 -3.456*** lnCTB10 -6.628*** -20.423*** lnCTB11 -2.243 -3.408** lnCTB11 -9.947*** -12.126*** lnCTB12 -1.980 -2.332 lnCTB12 -6.968*** -9.839*** POS_REER -2.167 -1.934 POS_REER -5.139*** -7.738*** NEG_REER 0.026 0.026 NEG_REER -5.164*** -6.953*** POS_VER 0.971 0.819 POS_VER -4.456*** -7.462*** NEG_VER -0.023 0.110 NEG_VER -4.757*** -5.488*** 193 lnY -1.464 -1.721 lnY -9.039*** -13.534*** lnYF -0.754 -0.963 lnYF -5.793*** -8.315*** Notes: The symbol “” represents the first-difference operator The symbols ***, **, and * indicate that the test statistics are significant at 1%, 5%, and 10% levels The tests include constants and no trends Table A4: The results of unit-root tests for the trade between each ASEAN member and the EU-28 Variables ADF PP lnATB1 -6.62*** -6.60*** lnATB2 -4.36*** lnATB3 Variables ADF PP lnATB1 -8.86*** -48.8*** -4.11*** lnATB2 -6.51*** -12.4*** -2.17 -2.20 lnATB3 -8.37*** -8.46*** lnATB4 -1.52 -6.49*** lnATB4 -9.27*** -43.4*** lnATB5 -2.24 -2.99** lnATB5 -13.3*** -13.3*** lnATB6 -2.46 -5.49*** lnATB6 -9.97*** -15.7*** lnATB7 -2.23 -2.03 lnATB7 -10.7*** -11.3*** lnATB8 -1.25 -2.38 lnATB8 -9.18*** -19.9*** lnATB9 -2.44 -2.37 lnATB9 -8.15*** -10.9*** lnATB10 -1.30 -5.51*** lnATB10 -8.84*** -29.3*** lnAY1 -2.54 -1.84 lnAY1 -2.86* -2.99*** lnAY2 -1.19 -1.16 lnAY2 -6.45*** -5.67*** lnAY3 -3.65*** -3.60*** lnAY3 -7.22*** -7.25*** lnAY4 -0.15 0.24 lnAY4 -5.09*** -8.50*** lnAY5 -1.35 -2.47 lnAY5 -5.93*** -8.82*** lnAY6 -0.64 -0.95 lnAY6 -4.43*** -4.37*** lnAY7 0.32 -1.43 lnAY7 -4.04*** -61.7*** 194 lnAY8 -1.68 -1.53 lnAY8 -8.32*** -9.07*** lnAY9 -2.57 -3.65 lnAY9 -3.93*** -10.1*** lnAY10 -1.20 -6.92*** lnAY10 -3.17** -32.8*** lnEY1 -0.32 -0.56 lnEY1 -11.5*** -11.1*** lnEY2 -0.95 -0.93 lnEY2 -9.94*** -9.85*** lnEY3 -0.62 -0.96 lnEY3 -3.37** -8.22*** lnEY4 -0.69 -1.1 lnEY4 -13.0*** -13.7*** lnEY5 -0.21 -0.69 lnEY5 -3.86*** -7.52*** lnEY6 -1.26 -1.6 lnEY6 -12.3*** -12.2*** lnEY7 -0.99 -0.96 lnEY7 -9.59*** -9.53*** lnEY8 -0.77 -1.22 lnEY8 -3.97*** -8.10*** lnEY9 -0.79 -1.15 lnEY9 -4.21*** -7.85*** lnEY10 -0.38 -0.83 lnEY10 -3.78*** -8.06*** POS_AREER1 -0.16 -0.18 lnPOS_AREER1 -8.97*** -8.95*** POS_AREER2 -1.42 -1.79 lnPOS_AREER2 -10.2*** -10.3*** POS_AREER3 -1.83 -1.93 lnPOS_AREER3 -8.19*** -8.19*** POS_AREER4 -0.14 -0.07 lnPOS_AREER4 -9.49*** -9.49*** POS_AREER5 -0.99 -1.06 lnPOS_AREER5 -9.21*** -9.27*** POS_AREER6 -0.3 -0.3 lnPOS_AREER6 -8.31*** -8.31*** POS_AREER7 -1.26 -1.31 lnPOS_AREER7 -9.27*** -9.26*** POS_AREER8 -0.97 -1.05 lnPOS_AREER8 -9.88*** -9.86*** POS_AREER9 -1.18 -1.18 lnPOS_AREER9 -8.53*** -8.53*** POS_AREER10 -2.04 -2.47 lnPOS_AREER10 -9.93*** -9.90*** NEG_AREER1 1.57 1.55 lnNEG_AREER1 -8.58*** -8.67*** NEG_AREER2 0.46 0.42 lnNEG_AREER2 -9.12*** -9.09*** 195 NEG_AREER3 -0.38 -0.4 lnNEG_AREER3 -7.98*** -8.02*** NEG_AREER4 0.28 0.29 lnNEG_AREER4 -8.33*** -8.33*** NEG_AREER5 0.31 0.17 lnNEG_AREER5 -5.67*** -5.96*** NEG_AREER6 -0.6 -0.59 lnNEG_AREER6 -6.61*** -6.59*** NEG_AREER7 0.31 0.27 lnNEG_AREER7 -8.24*** -8.26*** NEG_AREER8 0.67 0.67 lnNEG_AREER8 -8.40*** -8.40*** NEG_AREER9 0.58 0.56 lnNEG_AREER9 -7.82*** -7.84*** NEG_AREER10 0.27 0.27 lnNEG_AREER10 -7.51*** -7.51*** POS_RUSD1 -0.12 -0.12 lnPOS_RUSD1 -9.35*** -9.35*** POS_RUSD2 -1.26 -2.74* lnPOS_RUSD2 -8.67*** -10.0*** POS_RUSD3 -0.97 -0.96 lnPOS_RUSD3 -7.31*** -7.32*** POS_RUSD4 -4.63*** -4.22*** lnPOS_RUSD4 -6.40*** -6.69*** POS_RUSD5 2.18 2.01 lnPOS_RUSD5 -7.59*** -7.76*** POS_RUSD6 -0.54 -0.54 lnPOS_RUSD6 -8.40*** -8.40*** POS_RUSD7 -1.71 -1.65 lnPOS_RUSD7 -8.47*** -8.56*** POS_RUSD8 -0.87 -0.88 lnPOS_RUSD8 -8.75*** -8.79*** POS_RUSD9 -0.96 -0.96 lnPOS_RUSD9 -7.72*** -7.92*** POS_RUSD10 -1.96 -1.9 lnPOS_RUSD10 -8.19*** -8.20*** NEG_RUSD1 -0.14 -0.11 lnNEG_RUSD1 -8.30*** -8.36*** NEG_RUSD2 -0.35 -0.21 lnNEG_RUSD2 -5.59*** -5.63*** NEG_RUSD3 -2.43 -2.43 lnNEG_RUSD3 -7.62*** -7.66*** NEG_RUSD4 -1.53 -1.45 lnNEG_RUSD4 -4.98*** -4.93*** NEG_RUSD5 2.52 2.36 lnNEG_RUSD5 -6.60*** -6.60*** NEG_RUSD6 -3.45** -3.63*** lnNEG_RUSD6 -4.36*** -4.28*** NEG_RUSD7 -1.05 -0.94 lnNEG_RUSD7 -6.94*** -7.14*** 196 NEG_RUSD8 -0.72 -0.72 lnNEG_RUSD8 -8.92*** -8.92*** NEG_RUSD9 -0.46 -0.46 lnNEG_RUSD9 -8.73*** -8.74*** NEG_RUSD10 -0.32 -0.38 lnNEG_RUSD10 -6.38*** -6.44*** Notes: The symbol “” represents the first-difference operator The symbols ***, **, and * indicate that the test statistics are significant at 1%, 5%, and 10% levels The tests include constants and no trends Table A5: The results of unit-root tests for the trade between ASEAN and the EU-28 at the industry level Variables ADF PP Variables ADF PP lnATB1 -2.139 -2.941** lnATB1 -8.305*** -10.987*** lnATB2 -3.516*** -3.751*** lnATB2 -8.396*** -10.458*** lnATB3 -1.774 -1.705 lnATB3 -8.316*** -7.453*** lnATB4 -1.358 -1.577 lnATB4 -7.033*** -9.431*** lnATB5 -1.697 -1.980 lnATB5 -7.253*** -10.862*** lnATB6 -2.096 -2.606* lnATB6 -5.296*** -10.452*** lnATB7 -1.522 -2.548 lnATB7 -5.821*** -16.914*** lnATB8 -2.032 -3.293** lnATB8 -9.759*** -12.101*** lnATB9 -2.534 -7.383*** lnATB9 -6.049*** -26.817*** lnATB10 -1.885 -5.902*** lnATB10 -5.087*** -25.875*** lnATB11 -3.691*** -5.319*** lnATB11 -9.691*** -11.791*** lnATB12 -3.127** -2.982** lnATB12 -9.273*** -7.651*** lnAY -1.861 -2.495 lnAY -8.735*** -11.263*** lnEY -0.677 -0.762 lnEY -5.040*** -6.836*** POS_AREER -1.084 -0.996 POS_AREER -5.479*** -7.626*** NEG_AREER -0.147 0.030 NEG_AREER -4.739*** -6.754*** 197 POS_RUSD 1.243 1.043 POS_RUSD -5.177*** -8.052*** NEG_RUSD -0.613 -0.487 NEG_RUSD -5.399*** -7.958*** Notes: The symbol “” represents the first-difference operator The symbols ***, **, and * indicate that the test statistics are significant at 1%, 5%, and 10% levels The tests include constants and no trends Table A6: The impacts of the real effective exchange rate on China’s trade balance with the whole EU-28 adding control variables Variables (Short run) POS_REERt Coefficients/Test Variables results (Long run) 0.54*** POS_REERt 1.70** NEG_REERt lnYt lnYt-1 lnYFt lnREER_VOLt lnREER_VOLt-1 lnMSt lnMSt-1 lnMSt-2 lnCPIt lnCPIt-1 lnCPIt-2 -0.78** NEG_REERt -0.10 0.17 lnYt 2.36** -0.42* lnYFt 2.65** 0.84 lnREER_VOLt 0.009 -0.01 lnMSt -2.29** -0.02* lnCPIt -2.32 Constant 0.72 Bounds test 3.63** Adj – R 0.60 B-G 1.65 B-P 1.48 RR 1.68 -1.74** -0.71 0.68 -0.74 -2.30 -0.67 Coefficients 198 CUSUM S CUSUMSQ U Notes: REER_VOL, MS, and CPI respectively stand for the volatility of REER, money supply, and consumer price index The coefficients or test statistics marked with ***, **, or * are significant at 1%, 5%, or 10% levels, respectively The F-statistics are given for the bounds test, Breusch-Godfrey (B-G), Breusch-Pagan (B-P), and Ramsey RESET (RR) tests Table A7: The impacts of the vehicle currency USD’s exchange rate on China’s trade balance with the whole EU-28 adding control variables Variables (Short run) POS_VERt Coefficients/Test Variables results (Long run) -0.45 POS_VERt -0.84 NEG_VERt lnYt lnYt-1 lnYt-2 lnYt-3 lnYFt lnVER_VOLt lnVER_VOLt-1 lnVER_VOLt-2 lnVER_VOLt-3 lnMSt lnCPIt 0.86 NEG_VERt 4.14*** -0.80 lnYt 3.14*** -2.02** lnYFt 0.35 -1.65** lnVER_VOLt 0.23*** -1.45** lnMSt -0.73 0.18 lnCPIt -1.32 Constant -1.79 Bounds test 4.28** Adj – R2 0.66 B-G 0.45 B-P 1.44 RR 0.45 0.001 -0.12*** -0.08*** -0.03*** -0.38 -0.70 Coefficients 199 CUSUM S CUSUMSQ S Notes: VER_VOL, MS, and CPI respectively stand for the volatility of VER, money supply, and consumer price index The coefficients or test statistics marked with ***, **, or * are significant at 1%, 5%, or 10% levels, respectively The F-statistics are given for the bounds test, BreuschGodfrey (B-G), Breusch-Pagan (B-P), and Ramsey RESET (RR) tests Table A8: The impacts of the real effective exchange rate on ASEAN’s trade balance with the whole EU-28 adding control variables Variables (Short run) POS_AREERt Coefficients/Test Variables results (Long run) -0.11 POS_AREERt Coefficients -0.34 NEG_AREERt lnAYt lnEYt lnAREER_VOLt lnMSt lnCPIt -0.03 NEG_AREERt -0.10 0.09 lnAYt 1.85 -0.25 lnEYt -0.77 0.02 lnAREER_VOLt 0.06 -0.04* lnMSt -0.13 -0.08 lnCPIt -0.25 Constant 0.35 Bounds test 2.25 Adj – R2 0.43 B-G 0.66 B-P 0.85 RR 1.23 CUSUM S CUSUMSQ S Notes: AREER_VOL, MS, and CPI respectively stand for the volatility of AREER, money supply, and consumer price index The coefficients or test statistics marked with ***, **, or * are significant at 1%, 5%, or 10% levels, respectively The F-statistics are given for the bounds test, Breusch-Godfrey (B-G), Breusch-Pagan (B-P), and Ramsey RESET (RR) tests 200 Table A9: The impacts of the vehicle currency USD’s exchange rate on ASEAN’s trade balance with the whole EU-28 adding control variables Variables (Short run) POS_RUSDt Coefficients/Test Variables results (Long run) 0.18 POS_RUSDt Coefficients 2.05*** NEG_RUSDt lnAYt lnEYt lnEYt-1 lnRUSD_VOLt lnMSt lnCPIt 1.09** NEG_RUSDt 2.38** -0.65** lnAYt -1.43** 0.99 lnEYt 0.10 3.93*** lnRUSD_VOLt 0.01 0.009 lnMSt 0.005 0.002 lnCPIt 0.79 Constant 3.03** Bounds test 5.11*** Adj – R2 0.48 B-G 1.59 B-P 0.89 RR 2.38 CUSUM S CUSUMSQ S 0.36 Notes: RUSD_VOL, MS, and CPI respectively stand for the volatility of RUSD, money supply, and consumer price index The coefficients or test statistics marked with ***, **, or * are significant at 1%, 5%, or 10% levels, respectively The F-statistics are given for the bounds test, Breusch-Godfrey (B-G), Breusch-Pagan (B-P), and Ramsey RESET (RR) tests ...MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY HO HOANG GIA BAO THE ROLE OF VEHICLE CURRENCY IN AFFECTING TRADE BALANCE: EMPIRICAL EVIDENCE FROM THE TRADE. .. to the other partners This is the convincing evidence for the role of USD as a vehicle currency in the exportation of the EU Consequently, the USD is a crucial vehicle currency in the trade of. .. between China and the whole EU 4.2 The trade between China and each EU member and the UK 4.3 The trade between China and the EU at industry level 4.4 The summary of Chapter CHAPTER 5: EMPIRICAL