THE DETERMINANTS OF INFLATION IN VIETNAM

Syazwani, Shamsudin (2022) THE DETERMINANTS OF INFLATION IN VIETNAM. [Final Year Project Report] (Unpublished)

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Abstract

Inflation has always become a serious issue that need to take into consideration to be solved in every country all over the world. In this research, Vietnam has been chosen since it recorded the highest inflation rate in Southeast Asia comparatively in year 2020 estimated at 3.2%. The money supply, exchange rate, and unemployment rate have all been addressed in some articles on the factors of inflation in Vietnam. The objective of this study is to investigate the determinants of Inflation Rates (IR) in Vietnam such as Money Supply (MS), Exchange Rate (ER), and Unemployment Rate (UR). This study uses time series data of inflation rate, money supply, exchange rate, and unemployment rate between 1991 until 2020. Unit root test, Johansen Co-integration test, Vector Error Correction Model and Granger Causality are applied to estimate the relationships. ADF test and PP test have been applied to do the unit root test. The result reveals that all variables excluding IR are non-stationary at level but had become significant after first differences for all variables. The findings also demonstrated the existence of a relationship that holds true over the long run between the variables. The test had indicated that there was a positive relationship between money supply and inflation rate, meanwhile a negative relationship between exchange rate and inflation rate as well as unemployment rate and inflation rate.

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