Projected inflation and its implication for the Vietnam’s currency policy

Abstract

1. Economic growth, inflation and objectives in Vietnam’s currency policy

     High rate of inflation in the past few years suggests a threat to Vietnam’s economic stability and sustainable economic development in the future. During this time in spite of a high credit investment, economic growth tended to slow down. In the 2000-2010 period the economy grew down and its quality remained low, meanwhile the inflation tended to go up.

2. Some suggestions for Vietnam’s currency policy

2.1. Price stability should be the first and foremost aims for the currency policy.

2.2. The central bank is totally authorized to use its currency tool.

2.3. Renovation of the State Bank of Vietnam (SBV) as an advanced model of the Central Bank and the latter should be relatively independent from the government.

2.4. Suppose that the Central Bank is independence will still be subject to a certain pressure from the government.

2.5. Whether SBV is successful or not in curbing inflation depends on the coordination of currency policy and fiscal policy.

2.6. In order to realize the projected target of inflation the Central bank is required to have a good prediction.

     In order to apply the currency policy to curb the inflation rate as projected in the future the Central Bank should take the following solutions (a) Renovation of institutions, (b) Technical solution and (c) a supporting solution./.