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The Impact of Foreign Reserves Accumulation on Inflation in Vietnam: An ARDL Bounds Testing Approach

Part of the Studies in Computational Intelligence book series (SCI,volume 809)

Abstract

This paper evaluates the short-term and long-term effects of foreign reserves accumulation on inflation in Vietnam between Q1/2004 and Q1/2017 in the context of a dollarized economy. The paper has been based on Irving Fisher’s classic monetary theory and inherited Steiner’s model (2009), by approaching the Autoregressive Distributed Lag Bounds Test (ARDL Bounds Test) and using the Error Correction Model (ECM). The results show that when the accumulation of foreign reserves and other macroeconomic variables change, the time for inflation to return to equilibrium in the long run is more than one year. The results of short-term and long-term analysis shows that accumulation of foreign reserves have an impact on inflation in Vietnam.

Keywords

  • Accumulation of foreign reserves
  • Inflation
  • Dollarization
  • ARDL bounds test

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Fig. 1.

Source: IFS (2018)

Fig. 2.

Source: Authors’ calculations

Fig. 3.

Source: IMF (2018) and Authors’ calculations

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Correspondence to T. K. Phung Nguyen .

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Phung Nguyen, T.K., Thuy Nguyen, V., Hang Hoang, T.T. (2019). The Impact of Foreign Reserves Accumulation on Inflation in Vietnam: An ARDL Bounds Testing Approach. In: Kreinovich, V., Thach, N., Trung, N., Van Thanh, D. (eds) Beyond Traditional Probabilistic Methods in Economics. ECONVN 2019. Studies in Computational Intelligence, vol 809. Springer, Cham. https://doi.org/10.1007/978-3-030-04200-4_54

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