Reflections on the dynamics of the monetary source and foreign exchange reserves: an empirical approach to understanding the inflation’s fluctuations in Vietnam over 20 years (1996-2015)
Author : Nguyen, Duy Quang
Under the direction of: Nikolay Nenovsky
Amiens University
Texte français
Keywords : Economy, Vietnam, Monetary source, monetarism, VAR-Co-integration, Monetary policy - Vietnam - 1990 - 2020, Inflation - Vietnam - 1990 - 2020, Economic policy.
Abstract
This thesis entitled "Reflections on the Dynamics of Monetary Source and Foreign Exchange Reserves : An Empirical Approach to understanding inflation fluctuations in Vietnam over 20 years (1995-2016)" discussing the monetary policies implemented in a globally unstable economic situation. After observing the Vietnamese government’s socioeconomic achievements as well as its recovery efforts in the context of difficulties related to the global financial crisis, the author pays particular attention to the origin of the monetary source in Vietnam, as well as the problem of inflation fluctuations. In order to understand the source of inflation as well as the government’s monetary policy and the tools of the central bank, the author has chosen this topic not only to explain the monetary source in the Vietnamese economy but also to propose solutions to control inflation through the relationship with the exchange rate. In order to stabilize the macro-economy and control inflation, Vietnam’s monetary policy is adjusted according to the real financial situation in the market, especially after the Renovation policy and the global financial crisis in 2008. A few questions need to be asked in this case, (i) How can we determine the monetary source in Vietnam ? (ii) Does the monetary base depend on foreign exchange reserves or domestic credit ? (iii) On which variables does the inflation rate depend ? (iv) What is the influence of the exchange rate regime on inflation ? The choice of methodology to answer these questions is a combination of qualitative and quantitative methods. For the first method, the results come from work on the socioeconomic situation and research studies of the literature on Vietnam’s monetary system (Vietnamese and foreign authors). For the second method, the results of the theoretical assumptions are demonstrated from statistical analysis on the basis of data from Vietnam in the period 1995 - 2016, in order to explain the monetary source and inflation. Regarding the main results, (i) Vietnam’s monetary source comes from outside, meaning that there is a co-integration between the monetary base and foreign exchange reserves. In order to control the monetary source, attention is paid to changes in the balance of payments as well as to the external counterpart (external operations carried out by either the central bank or commercial banks). (ii) Vietnam’s inflation rate depends on the exchange rate. Inflation control depends not only on the money supply, in the case of Vietnam, but also on the exchange rate regime. A change in the exchange rate has an impact on inflation and vice versa. Thus, an exchange rate shock has an impact on inflation. The author finds that inflation and the exchange rate fluctuate in the same direction and that the shift from one macroeconomic variable to another has a lag of about 5 semesters (in the short run). The conclusions drawn from the thesis show that the monetary source and inflation control have a strong impact on the Vietnamese economy during and after financial crises. In parallel with the research carried out to provide forecasts for macroeconomic stabilization and inflation control, the author wishes to develop his ideas and improve the econometric model according to the evolution of economic data and general comparison with the research work since 2018.
