The impact of oil prices, real effective exchange rate and inflation on economic activity: Novel evidence for Vietnam

Viet Trung Le and Nguyen Thi Thuy Vinh
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Viet Trung Le: Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan
Nguyen Thi Thuy Vinh: Graduate School of Economics, Kobe University, Japan

No DP2011-09, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: The goal of this paper is to examine the impact of oil prices on Vietnam's economic activity using vector autoregressive (VAR) modeling and cointegration techniques. We use monthly data for the period 1995-2009 and include inflation and the real effective exchange rate as additional determinants of economic activity. We find evidence of a long-run relationship between oil prices, inflation, exchange rate, and economic activity. The results suggest that both oil prices and the real effective exchange rates have strongly significant impact on economic activity. An increase in oil price or depreciation may enhance economic activity. Vietnamese economic activity is influenced more by changes of value of Vietnamese currency than the fluctuations of oil prices. Inflation has a positive impact on economic activity however its impact is not highly significant. This suggests that moderate inflation is helpful rather than harmful to economic activity.

Keywords: Oil price; Economic activity; Vietnam (search for similar items in EconPapers)
JEL-codes: E60 F41 O53 P20 Q43 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2011-03
New Economics Papers: this item is included in nep-ene, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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