The Asymmetric Effects of Geopolitical Risks on Exports in a Transition Economy: Evidence from Vietnam

This study is devoted to investigate the asymmetric effects of geopolitical risks (GPRs) on Vietnam’ exports during the period from January 2010 to December 2024. Using a nonlinear Autoregressive Distributed Lag (NARDL) bounds testing model, the study documented that in the short-term, the GPRs have asymmetric effects on Vietnam’s exports. Specifically, the negative changes in the GPRs have a significantly negative effect on the exports while the positive changes in the GPRs have no significant impact on the exports. In the long-term, the same effects of the GPRs on exports are also found from the NARDL model. Specifically, the negative changes in the GPRs have a significantly adverse effect on the exports while the positive changes in the GPRs have no significant influences on Vietnam’s exports in the long-term. Moreover, the empirical findings reveal that, in the long-term, real exchange rate (RER) has a significantly positive impact on the exports, suggesting that the depreciation of VND (Vietnam Dong) boosts Vietnam’s exports. Finally, the results derived from the error correction model (ECM) show that 34.82 percent of the divergence from the long-run equilibrium caused by a shock this month will be corrected and adjusted back toward equilibrium in the following month.