Estimating the New Keynesian Phillips Curve in Vietnam

This research aimed to identify existence of a New Keynesian Phillips Curve in Vietnam. The examined period was 2012Q2 – 2025Q2, using secondary macroeconomics data and the Generalised Moments Method at 95% level of confidence. The dependent variables were price inflation and wage inflation, while the independent variables were the expected future inflation, three proxies of real marginal cost (the output gap, unit labour cost and labour income share), and the long-short interest rate spread. Findings from the research confirmed the existence of the traditional NKPC in Vietnam, with inflation positively influenced by the real marginal cost. Among the proxies, the conventional output gap is not totally outdated, having a positive, weak but statistically significant impact on wage inflation. Still, proxies related to the labour market were much stronger, positive determinants of both price and wage inflations. The inclusion of the interest rate spread made the effects of the proxies (on inflation) slightly stronger. A positive relationship was also found between current and expected future inflation, and inflation persistence in Vietnam was witnessed. Compared to some other emerging, open economies in the world, the Phillips curve in Vietnam in the period was flatter. The research wrapped up with some implications for academic researchers and Vietnam’s central bank, specifically regarding the cautious application of the structural NKPC model to explain short-run inflation dynamics in monetary decisions in Vietnam.