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Welfare consequences of inconsistent monetary policy implementation in Vietnam

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  • Le Thanh Ha
  • To Trung Thanh
  • Doan Ngoc Thang

Abstract

We develop a New Keynesian model featuring Calvo price setting and Calvo wage setting to quantify the welfare consequences of shifting trend inflation in Vietnam. To capture the characteristics of the Vietnamese economy, we use the Simulated Method of Moment and calibrate parameters jointly to match the important selected moments of Vietnamese data. The results show a severe consequence of a constant positive trend inflation and an exogenous shock to trend inflation, especially when a central bank sets a high level of inflation target. Among staggered price and wage contracts, the latter play a vital role in transmitting the adverse impacts of constant and shifting trend inflation into the economy. Based on our analyses, raising inflation targets would seem to be a bad policy prescription in Vietnam.

Suggested Citation

  • Le Thanh Ha & To Trung Thanh & Doan Ngoc Thang, 2020. "Welfare consequences of inconsistent monetary policy implementation in Vietnam," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 33(1), pages 555-578, January.
    • Handle: RePEc:taf:reroxx:v:33:y:2020:i:1:p:555-578
    DOI: 10.1080/1331677X.2020.1724172
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    Cited by:

    1. AMODU, Muhammed Abdulasisi & ADEDAYO, Olawale Clement & AKEREDOLU, Adebisi Gabriel, 2023. "Monetary Policy and People’s Socio-Economic Welfare in Nigeria," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 10(06), pages 71-82, June.

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