**6. Concluding Remarks**

Intensive debates have taken place on the impact of currency depreciation on Vietnam's export performance in recent years. Many may support this strategy because it is argued that doing so will enhance export performance, whereas others assert that the policy could lead to exchange rate volatility, which, in turn, is harmful to exports. This study was conducted to shed light on the link between exchange rate volatility and exports between Vietnam and 26 of its key export partners for the 2001–2015 period using data from the disaggregated level for both the manufacturing sector and its 10 subsectors.

Key findings from this empirical study are as follows. *First*, with regard to the manufacturing sector, the strategy of devaluing the VND provides a positive impact on Vietnam's manufacturing exports in the short run, but it creates exchange rate volatility, causing a decline in export value in the long run. In the short run, this strategy is beneficial only for the exports to Asian countries, while there is no supporting evidence for a clear short-run effect for all three regions—Asia, Europe, and America. Exchange rate volatility is, on average, harmful in the long run, especially when the exporting destination is a European country. Interestingly, no influence on export performance is shown in the short run for either the whole sample or the three subsamples. *Second*, Vietnam's manufacturing exports benefit from an increase in foreign income, as well as its participation in the WTO, to some extent. Meanwhile, the global financial crisis hindered the export value of the manufacturing sectors in Vietnam, as expected. *Third*, with regard to 10 specific subsectors in Vietnam, exchange rate volatility has negative effects on export performance for most of them in the long run, whereas mixed evidence is found for some in the short run.

On balance, the findings from this study confirm that, in the context of Vietnam, the level of the bilateral real exchange rate between the VND and other currencies is far more important than currency volatility for enhancing export performance for Vietnam in the short run. Thus, Vietnam's authorities could take advantage of depreciation to enhance exports, thus balancing the current net trade. Yet, intervention involving the exchange rate market should be conducted with caution, as it causes fluctuations in exchange rates, resulting in poor export performance in the long run. Also, it should be noted that at disaggregated levels, exchange rate volatility seems to cause more harm to exporters to the American region than to Asian and European partners, especially in some specific subsectors. Thus, it is suggested that exporters to American markets in these sectors use hedging instruments in the derivatives market to maintain their targeted export value and profitability.

There are some shortcomings in the current study. First, it is possible that exchange rate devaluation, volatility, and export performance have a reversed causal relationship with one another. When there are problems with exports, the exchange rate reacts more severely with greater depreciation, thus making exchange rates more volatile. Second, the effect of increases and decreases in exchange rate volatility on exports may be considerably different, raising the asymmetric effect. Nishimura and Hirayama (2013) find an asymmetric effect of the level of exchange rate and the volatility have different effects on bilateral exports between China and Japan. Thus, it would be worth taking those issues into consideration in future research using higher-frequency data, especially for a small open dynamic country like Vietnam. The country has targeted its exports as an important factor in boosting economic growth and is becoming increasingly integrated into the region and the world.

**Author Contributions:** D.H.V., A.T.V. and Z.Z. have contributed jointly to all of the sections of the paper.

**Funding:** This research was funded by Ho Chi Minh City Open University Grant Number E2017.6.15.1.

**Acknowledgments:** We would like to thank the three anonymous referees for their helpful comments and suggestions. We also thank the participants at the 1st Vietnam's Business and Economics Research Conference (Ho Chi Minh City Open University, Ho Chi Minh City, Vietnam, 16–18 November 2017) and at the 4th International Conference on China's Rise and Internationalization (Ningbo University, Ningbo, China, 7–8 December 2018). The authors are responsible for any remaining errors or shortcomings.

**Conflicts of Interest:** The authors declare no conflict of interest.
