Fighting inflation in a dollarized economy: The case of Vietnam

Goujon, Michaël

doi:10.1016/j.jce.2006.06.001

“…The rest of the primary drivers (inflation inertia, deposit rate and money supply) are found to be significant during Regime 2. Moreover, each of these root-causes of inflation contributed more significantly during the volatile regime, as 11 The coefficient estimate of deposit interest rate at 12 The significant inflationary implication of money supply expansion has also been highlighted by previous studies such as Goujon (2006) Tables 6 and 7 are consistent with those reported in Tables 3 and 4, respectively.…”

Section: Markov-switching Vector Autoregressive (Ms-var) Frameworksupporting

confidence: 70%

“…Goujon (2006) investigates the determinants of inflation in the dollarized economy of Vietnam in the 1990s using a two-step cointegration procedure. The study highlights the impact of exchange rate variations on the broad money supply and the dollar-denominated price of some non-tradable goods in the context of dollarization, and on inflation accordingly.…”

Section: Inflation In Vietnammentioning

confidence: 99%

“…While its industrial uses remain limited, confining mainly to jewellery fabrication and medical treatment, gold has been a traditional form of savings and a parallel currency for decades. As such, banks in The adverse effects of inflation are well known, and for Vietnam, price instability has been argued to be a primary factor in stifling economic development (Goujon (2006) and Nguyen, Cavoli and Wilson (2012)). …”

Section: Introductionmentioning

confidence: 99%

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Inflationary Implication of Gold Price in Vietnam

Siregar¹,

Cúc

²

2013

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Abstract:The sustained elevated gold price domestically, hovering persistently above the global market price, underscores the peculiar nature of the gold market in Vietnam and the resiliently strong demand for gold in the local market. In particular, the movements in the price of gold seem to lead a symmetrical trend in the headline inflation since the outbreak of the 2007 global financial crisis. The primary objective of this study is therefore to assess possible inflationary consequence of the gold price movements in Vietnam. Past studies demonstrate that if gold could be viewed as a financial asset, shifts in the gold price should be monitored as one of the determining factors of inflation. Yet, hardly any study has assessed potential inflationary implication of gold in Vietnam, especially during the recent years of volatile and double-digit inflation rates.

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“…The estimation technique typically follows mainstream literature on the dynamics of inflation (Bernanke & Gertler, 1995;Detken & Smets, 2004;Goujon, 2006) Table 2 here"…”

Section: Methodsmentioning

confidence: 99%

Correcting Inflation with Financial Dynamic Fundamentals: Which Adjustments Matter in Africa?

Asongu

¹

2014

Journal of African Business

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may April 2013 AbstractThis paper assesses the adjustment of inflation with financial dynamic fundamentals of money (financial depth), credit (financial activity) and efficiency. Three main findings are established.(1) There are significant long-run relationships between inflation and the fundamentals. (2) The error correction mechanism is stable in all specifications but in case of any disequilibrium, only financial depth is significant in adjusting inflation to the long-run relationship. (3) In the long-run, short-term adjustments in the ability of banks to transform money into credit do not matter in correcting inflation. This is most probably due to surplus liquidity issues. Policy implications are discussed.JEL Classification: E31: E51; O55

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“…The estimation technique typically follows mainstream literature on fighting inflation (Bernanke & Gertler, 1995;Goujon, 2006). The estimation approach entails the following steps: unit root tests, cointegration tests, vector error correction estimation,…”

Section: Methodsmentioning

confidence: 99%

Fighting Consumer Price Inflation in Africa. What Do Dynamics in Money, Credit, Efficiency and Size Tell Us?

Asongu

¹

2012

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Design/methodology/approach -We limit our sample to a panel of African countries for which inflation is non-stationary. VAR models from both error correction and Granger causality perspectives are applied. Analyses of dynamic shocks and responses are also covered. Six batteries of robustness checks are applied to ensure consistency in the results. Terms of use: Documents inFindings -(1) There are significant long-run equilibriums between inflation and each financial dynamic. (2) When there is a disequilibrium, while only financial depth and financial size could be significantly used to exert deflationary pressures, inflation is significant in adjusting all financial dynamics. In other words, financial depth and financial size are more significant instruments in fighting inflation than financial efficiency and activity. (3) The financial intermediary dynamic of size appears to be more instrumental in exerting a deflationary tendency than financial intermediary depth. (4) The deflationary tendency from money supply is double that based on liquid liabilities.Practical implications -Monetary policy aimed at fighting inflation only based on bank deposits may not be very effective until other informal and semi-formal financial sectors are taken into account. It could be inferred that, tight monetary policy targeting the ability of banks to grant credit (in relation to central bank credits) is more effective in tackling consumer price inflation than that, targeting the ability of banks to receive deposits. In the same vein, adjusting the lending rate could be more effective than adjusting the deposit rate. The insignificance of financial allocation efficiency and financial activity as policy tools in the battle against inflation could be explained by the (well documented) surplus liquidity issues experienced by the African banking sector. 3 campaigns involving strikes, demonstrations, marches, rallies and political crises that seriously disrupt economic performance could be mitigated. Social implicationsOriginality/value -As far as we have perused, there is yet no study that assesses monetary policy options that could be relevant in addressing the dramatic surge in the price of consumer commodities.

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Fighting inflation in a dollarized economy: The case of Vietnam

Cited by 34 publications

References 21 publications

Inflationary Implication of Gold Price in Vietnam

Inflationary Implication of Gold Price in Vietnam

Correcting Inflation with Financial Dynamic Fundamentals: Which Adjustments Matter in Africa?

Fighting Consumer Price Inflation in Africa. What Do Dynamics in Money, Credit, Efficiency and Size Tell Us?

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