Inflation Structure in Vietnam Economy

The paper investigates the structure of inflation in the Vietnam economy, as a developing economy with a strong record of low inflation and high economic growth rate over recent years, even during the recent Covid-19 pandemic. Methodology: The paper uses a quantitative analysis which investigates the quarterly dataset of inflation for the Vietnam economy over 1990-2021. The inflation is decomposed into three main components including core inflation, energy inflation and food inflation. Findings: The evidence records that the main driver of inflation in the Vietnam economy is the food inflation. Moreover, both energy and food inflation tends to have a large deviation over time. This illustrates the impact of the world commodity market on domestic inflation. The core inflation, however, is quite stable over time, reflecting the effectiveness of monetary policy in the Vietnam economy. Implications: The results implies that the food inflation can be a prioritized objective for the Vietnam economy to stabilize the domestic inflation. Moreover, the monetary policy, which affects the core inflation, needs to be combined with the fiscal policy, which affects the energy inflation.