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.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Bahmani-Oskooee, M., Domac, I.: On the link between dollarisation and inflation: evidence from Turkey. Comp. Econ. Stud. 45(3), 306–328 (2003)
Berg, A., Borensztein, E., Mauro, P.: Monetary regime options for Latin America. Financ. Develop. 40(3), 24–27 (2003)
Krušković, B.D., Maričić, T.: Empirical Analysis of the impact of foreign exchange reserves to economic growth in emerging economics. Appl. Econ. Financ. 2(1), 102–109 (2015)
Chaudhry, I.S., Akhtar, M.H., Mahmood, K., Faridi, M.Z.: Foreign exchange reserves and inflation in Pakistan: evidence from ARDL modelling approach. Int. J. Econ. Financ. 3(1), 69 (2011)
Chen, L., Huang, S.: Transmission effects of foreign exchange reserves on price level: evidence from China. Econ. Lett. 117(3), 870–873 (2012)
Denbee, E., Jung, C., Paternó, F.: Stitching together the global financial safety net. Bank of England Financial Stability Paper, (36) (2016)
Drummond, P., Mrema, A., Roudet, S., Saito, M.: Foreign Exchange Reserve Adequacy in East African Community Countries. International Monetary Fund (2009)
Elhiraika, A., Ndikumana, L.: Reserves accumulation in African countries: sources, motivations, and effects. Economics Department Working Paper Series, 24 (2007)
Fisher, I.: Purchasing Power of Money: Its Determination and Relation to Credit Interest and Crises. Rev AM Kelley, New York (1922)
IMF: Adequacy of the Global Financial Safety Net, March 2016
IFS: International Financial Statistic (2018)
Goujon, M.: Fighting inflation in a dollarized economy: the case of Vietnam. J. Comp. Econ. 34(3), 564–581 (2006)
Gruben, W.C., McLeod, D.: Currency competition and inflation convergence. Center for Latin American Economics. Federal Reserve Bank of Dallas. Working Paper, 204 (2004)
Heller, H.R.: International reserves and world-wide inflation. IMF Staff Papers 23(1), 61–87 (1979)
Hossain, A.A.: Monetary targeting for price stability in Bangladesh: how stable is its money demand function and the linkage between money supply growth and inflation? J. Asian Econ. 21(6), 564–578 (2010)
Khan, M.S.: Inflation and international reserves: a time-series analysis. Staff Papers 26(4), 699–724 (1979)
Lin, M.Y., Wang, J.S.: Foreign exchange reserves and inflation: an empirical study of five east Asian economies, pp. 1–18. Aletheia University, Taiwan, Chengchi University, Taiwan (2005)
McCandless Jr., G.T., Weber, W.E.: Some monetary facts. Federal Reserve Bank of Minneapolis. Q. Rev. Fed. Reserv. Bank Minneap. 19(3), 2 (1995)
Mengesha, L.G., Holmes, M.J.: Does dollarization reduce or produce inflation? J. Econ. Stud. 42(3), 358–376 (2015)
Mishkin, F.S.: The Economics of Money, Banking, and Financial Markets, vol. 422. Pearson education, London (2007)
Moghadam, R., Hagan, S., Tweedie, A., Viñals, J., Ostry, J.D.: The Fund’s Mandate–Future Financing Role. IMF, 25 March 2010
Nassar, K.B.: Money demand and inflation in Madagascar (No. 5-236). International Monetary Fund (2005)
Nguyen, B.V.: Effects of fiscal deficit and money M2 supply on inflation: Evidence from selected economies of Asia. (2015). Browser Download This Paper
Hong, N.T.: Dollarization and monetary policy management in Vietnam. Retrieved from the State Bank of Vietnam database (2012)
Nowak, M.M., Hviding, M.K., Ricci, M.L.A.: Can higher reserves help reduce exchange rate volatility? (No. 4–189). International Monetary Fund (2004)
Pesaran, M.H., Shin, Y., Smith, R.J.: Bounds testing approaches to the analysis of level relationships. J. Appl. Econ. 16(3), 289–326 (2001)
Trinh, P.T.T.: Impact of accumlation foreign exchange reserves on inflation : VAR approach. J. Econ. Develop. 26(4), 46–68 (2015)
Rabin, A., Pratt, L.J.: A note on heller’s use of regression analysis. Staff Papers (International Monetary Fund) 28(1), 225–229 (1981)
Reinhart, C.M., Rogoff, K.S., Savastano, M.A.: Addicted to dollars (No. w10015). National bureau of economic research (2003)
Steiner, A.: Does the Accumulation of International Reserves Spur Inflation? A Panel Data Analysis. University of Osnabrueck, Osnabrueck (2009)
Steiner, A.: Does the accumulation of international reserves spur inflation? a reappraisal. North Am. J. Econ. Financ. 41, 112–132 (2017)
Yeyati, E.L.: Financial dollarization: evaluating the consequences. Econ. Policy 21(45), 62–118 (2006)
Zhou, L., Zhang, N., Chen, Q.Y.: Foreign exchange reserves, monetary policy and inflation: an empirical study from China. Adv. Inf. Sci. Serv. Sci. 5(4), 920 (2013)
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2019 Springer Nature Switzerland AG
About this paper
Cite this paper
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
Download citation
DOI: https://doi.org/10.1007/978-3-030-04200-4_54
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-04199-1
Online ISBN: 978-3-030-04200-4
eBook Packages: Intelligent Technologies and RoboticsIntelligent Technologies and Robotics (R0)