A Macro-Model Approach to Monetary Policy Analysis and Forecasting for Vietnam

Allan Dizioli and Jochen M. Schmittmann

No 2015/273, IMF Working Papers from International Monetary Fund

Abstract: The paper develops a small New-Keynesian FPAS model for Vietnam. The model closely matches actual data from 2000-2014. We derive an optimal monetary policy rule that minimizes variability of output, inflation, and the exchange rate. Compared to the baseline model, the optimal rule places a larger weight on output stabilization as the intermediate target to achieve inflation stability, while allowing greater exchange rate flexibility. We analyze the dynamics of key macro variables under various shocks including external and domestic demand shocks and a lift-off of U.S. interest rates. We find that the optimal monetary policy rule delivers greater macroeconomic stability for Vietnam under the shock scenarios.

Keywords: WP; demand shock; nominal interest rate; Inflation Targeting; Monetary Policy; Bayesian Estimation; monetary policy rule; inflation stability; nominal exchange rate; food inflation Phillips Curve; fuel inflation; Inflation; Output gap; Exchange rates; Real interest rates; Global (search for similar items in EconPapers)
Pages: 25
Date: 2015-12-23
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Citations: View citations in EconPapers (4)

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