Title: Key determinants of inflation and monetary policy in the emerging markets: evidence from Vietnam

Authors: Mohammed M. Elgammal; Mohamed Abdelaziz Eissa

Addresses: Department of Finance and Economics, College of Business and Economics, Qatar University, Duhil, Doha, 2713, Qatar; Faculty of Commerce, Menoufia University, Egypt ' Department of Finance and Economics, College of Business and Economics, Qatar University, Duhil, Doha, 2713, Qatar; Faculty of Commerce, Assuit University, Egypt

Abstract: The study explores the key determinants of inflation in Vietnam for a period of ten year (2000-2011) using the explanatory variables: past inflation, real income, money supply, exchange rate, interest rate and world oil price. This study uses a vector error correction model to investigate the relationship among inflation and the above variables. We found significant relationships among inflation and three variables, past inflation, real income and exchange rate, moreover, the past inflation variable plays the most important role in explaining the current inflation in Vietnam. The exchange rate pass-through is found to have a remarkable influence on inflation in the short run, in particular, a reduction in exchange rate will lead to higher prices. Real income has a negative and small impact relationship with inflation, while the other explanatory variables have insignificant impact on inflation.

Keywords: inflation; Vietnam; emerging markets; vector error correction model; VECM; monetary policy; past inflation; real income; money supply; exchange rates; interest rates; world oil prices.

DOI: 10.1504/AAJFA.2016.079256

Afro-Asian Journal of Finance and Accounting, 2016 Vol.6 No.3, pp.210 - 223

Available online: 21 Sep 2016 *

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