Impacts of the monetary policy on the exchange rate: case study of Vietnam

Pham Van Anh

Journal of Asian Business and Economic Studies, 2019, vol. 26, issue 2, 220-237

Abstract: Purpose - The purpose of this paper is to evaluate and analyze impacts of the monetary policy (MP) – money aggregate and interest rate – on the exchange rate in Vietnam. Design/methodology/approach - The study uses data over the period of 2008–2018 and applies the vector autoregression model, namely recursive restriction and sign restriction approaches. Findings - The main empirical findings are as follows: a contraction of the money aggregate significantly leads to the real effective exchange rate (REER) depreciating and then appreciating; a tightening of the interest rate immediately causes the REER appreciating and then depreciating; and both the money aggregate and the interest rate strongly determine fluctuations of the REER. Originality/value - The quantitative results imply that the MP affects the REER considerably.

Keywords: Exchange rate; Vietnam; Monetary policy; VAR; Time series; C32; E52; F31 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jabesp:jabes-11-2018-0093

DOI: 10.1108/JABES-11-2018-0093

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