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Key determinants of inflation and monetary policy in the emerging markets: evidence from Vietnam

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  • Mohammed M. Elgammal
  • Mohamed Abdelaziz Eissa

Abstract

The study explores the key determinants of inflation in Vietnam for a period of ten year (2000-2011) using the explanatory variables: past inflation, real income, money supply, exchange rate, interest rate and world oil price. This study uses a vector error correction model to investigate the relationship among inflation and the above variables. We found significant relationships among inflation and three variables, past inflation, real income and exchange rate, moreover, the past inflation variable plays the most important role in explaining the current inflation in Vietnam. The exchange rate pass-through is found to have a remarkable influence on inflation in the short run, in particular, a reduction in exchange rate will lead to higher prices. Real income has a negative and small impact relationship with inflation, while the other explanatory variables have insignificant impact on inflation.

Suggested Citation

  • Mohammed M. Elgammal & Mohamed Abdelaziz Eissa, 2016. "Key determinants of inflation and monetary policy in the emerging markets: evidence from Vietnam," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 6(3), pages 210-223.
    • Handle: RePEc:ids:afasfa:v:6:y:2016:i:3:p:210-223
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    Cited by:

    1. Pham, Thai-Binh & Sala, Hector, 2019. "The macroeconomic effects of oil price and risk-premium shocks on Vietnam: Evidence from an over-identifying SVAR analysis," MPRA Paper 96873, University Library of Munich, Germany, revised 05 Jul 2019.

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