Impact of exchange rate volatility on green export margins of Vietnam: a gravity approach

Purpose This study assesses the relationship between real exchange rate volatility and trade margins of Vietnam’s green product exports. Design/methodology/approach Based on the environmentally friendly products listed by the Organization for Economic Co-operation and Development, World Trade Organization and Asia-Pacific Economic Cooperation, this study constructs a green product list comprising 485 goods classified at the six-digit level of the HS2002 system. The Poisson Pseudo-Maximum Likelihood (PPML) estimators are applied to a gravity model covering Vietnam’s green exports to 170 partners from 2002 to 2022. Findings This study discovers that fluctuations in exchange rates between the Vietnamese Dong and currencies of partners have a detrimental influence on Vietnam’s green export flows and its market share in total world exports of green products to those importers. Particularly, this negative impact can be attributed to a decrease in both extensive and intensive margins of exports. Therefore, the policies aiming at stabilizing the exchange rates are necessary to boost Vietnam’s green exports, ultimately contributing to ensuring Vietnam’s sustainable growth. Originality/value This study posits the necessity for continued scholarly inquiry into mechanisms for enhancing Vietnam’s green export performance, specifically through interventions designed to mitigate exchange rate volatility.