EconPapers    
Economics at your fingertips  
 

An empirical analysis on the parallel foreign exchange market: The case of Vietnam

Duy Hung Bui

No 6719, EcoMod2014 from EcoMod

Abstract: Vietnam is a developing country with a fixed exchange rate regime and the use of foreign currency is under control of the monetary authorities. Hence, like other developing countries, Vietnam also has the parallel exchange market that exists together with the official exchange market though, it is illegal. The existence of the parallel exchange market creates several complications to the State Bank of Vietnam in their attempts to manage the foreign exchange market and the exchange rate. Fluctuations in the parallel market rates affect both the level of international reserves, the position of the economy and portfolio decisions of the public. Therefore, a strong understanding of the parallel foreign exchange market will help the State bank of Vietnam have sound policies in the foreign exchange market. The monetary approach to the parallel foreign exchange market initially developed by Blejer (1978) and then further developed by Agénor (1991) is used. This approach focuses on the disequilibrium in the money market in explaining movements in output, price, the parallel market exchange rate, and change in net foreign assets An increase of money supply by 1% causes the exchange rate in the parallel market depreciated by 0.015%. A 1 per cent devaluation of the official exchange rate would bring about 1.33 per cent devaluation of the parallel market rate. These results bespeak the State Bank of Vietnam’s efforts to reduce the market premium seem to be not success and stimulating economic growth by money supply would lead to deprecation in both markets

Keywords: Vietnam; Macroeconometric modeling; Monetary issues (search for similar items in EconPapers)
Date: 2014-07-03
New Economics Papers: this item is included in nep-ifn, nep-mac, nep-mon, nep-sea and nep-tra
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://ecomod.net/system/files/An%20empirical%20an ... %20of%20Vietnam.docx
Our link check indicates that this URL is bad, the error code is: 403 Forbidden (http://ecomod.net/system/files/An%20empirical%20analysis%20on%20the%20parallel%20foreign%20exchange%20market%20the%20case%20of%20Vietnam.docx [301 Moved Permanently]--> https://ecomod.net/system/files/An%20empirical%20analysis%20on%20the%20parallel%20foreign%20exchange%20market%20the%20case%20of%20Vietnam.docx)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ekd:006356:6719

Access Statistics for this paper

More papers in EcoMod2014 from EcoMod Contact information at EDIRC.
Bibliographic data for series maintained by Theresa Leary ().

 
Page updated 2025-03-19
Handle: RePEc:ekd:006356:6719