THE EFFECT OF MACROECONOMIC VARIABLES ON THAILAND - LAOS BORDER TRADE

Abstract

The objective of this research is to study macroeconomic variables that affect the value of Thailand-Laos border trade. The macroeconomic variables are the Kip exchange rate per US dollar, exchange rate of Baht per US Dollar, interest rates for one year short-term loans of Bank of The Lao PDR , retail loan interest rate of good customers of the Bank of Thailand, Laos consumer price index, Thai Consumer Price Index of Thailand, respectively.

Using monthly statistical data between January 2007 and December 2018, two hypotheses were defined (i) each macroeconomic variable affecting the value of trade between the Thailand-Laos border with unequal sizes and ( ii) the change of the baht / US dollar exchange rate will have a greater impact on the value of Thailand-Laos border trade than other variables used in the study.

Appling Vector Autoregressive (VAR) model, this study also shows that if changes occur with each variable used in the study, it will affect the value of Thailand-Laos border trade not only in the same direction but also in the opposite direction with unequal sizes according to hypothesis 1. By sorting the variables that affect the value of Thailand-Laos border trade Descending is as follows Exchange rate Kip to US Dollar, Laos Consumer Index, Thai and Laos interest rates, Thai Consumer Index and the Baht / Dollar exchange rate which is not in line with hypothesis 2.