Symmetric and Asymmetric Effects of Exchange Rates on Money Demand: Empirical Evidence From Vietnam

BETA working paper 2019-49

Applied Economics: https://www.tandfonline.com/doi/full/10.1080/00036846.2021.1888864

28 Pages Posted: 10 Jan 2020 Last revised: 1 Mar 2021

See all articles by Sy Hoa Ho

Sy Hoa Ho

Bank for Investment and Development of Vietnam (BIDV); Duy Tan University

Jamel Saadaoui

University of Strasbourg

Date Written: December 19, 2019

Abstract

This empirical investigation aims at exploring the determinants of money demand in Vietnam by using both linear and nonlinear autoregressive distributed lags models over the period spanning from the third quarter of 2000 to the first quarter of 2018. Our findings can be summarized as follows: firstly, when the shock is symmetric (i.e. a permanent nominal appreciation of one percent), the money demand increases by 3.7 percent in the long term. Secondly, when the shock is asymmetric, for a permanent nominal appreciation of one percent, we observe an increase of 15.6 percent in the money demand. Whereas, for a permanent nominal depreciation of one percent, we observe a decrease of 7.4 percent in the money demand. These results are consistent with symmetry tests and lead us to think that asymmetries occur mainly in the short run and are transmitted to the long run.

Keywords: Money Demand, Exchange Rate, ARDL models, NARDL models, Dollarization

JEL Classification: C22, E41, F31, F33 , F41

Suggested Citation

Ho, Sy Hoa and Saadaoui, Jamel, Symmetric and Asymmetric Effects of Exchange Rates on Money Demand: Empirical Evidence From Vietnam (December 19, 2019). BETA working paper 2019-49, Applied Economics: https://www.tandfonline.com/doi/full/10.1080/00036846.2021.1888864, Available at SSRN: https://ssrn.com/abstract=3507120 or http://dx.doi.org/10.2139/ssrn.3507120

Sy Hoa Ho

Bank for Investment and Development of Vietnam (BIDV) ( email )

BIDV Tower, 35 Hang Voi
Hoan Kiem
Hanoi, 10000
Vietnam

Duy Tan University ( email )

182 Nguyễn Văn Linh, Thanh Khê
Da Nang
Da Nang
Vietnam

Jamel Saadaoui (Contact Author)

University of Strasbourg ( email )

61 Avenue de la Forêt Noire
Strasbourg, Alsace 67000
France

HOME PAGE: http://www.jamelsaadaoui.com/

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