The macro-economic effects of oil price shocks and the reaction of monetary policy in Vietnam

Abstract

The study explores the macroeconomic impacts of oil price fluctuation under the control of government and examines how the monetary policy reacts to oil price shocks. By employing VAR/VECM and using monthly data of Vietnam in the period fromJanuary, 2008 toDecember, 2015, the study finds significant impacts of oil price on inflation and output growth in both the short term and long term. In the long term, 1 percent increase in oil price causes inflation and output growth to increase by 0.2 and 0.1 percent respectively. In the short term, after the positive oil price shock, inflation increased consecutively in the first six months while output growth fluctuated dramatically in twelve months. Following the positive oil price shock, the monetary policy was kept very tight in the first 3 three months. The level of contraction was gradually reduced in the next 3 months and the monetary policy stopped reaction from the seventh month. However, the monetary policy is not concerned for oil price fluctuation; instead it is more concerned for the price fluctuation of the economy

Keywords

• chính sách tiền tệ
• giá dầu
• lạm phát
• tăng trưởng
• việt nam