Analyzing Factors Influencing Inflation in Vietnam Using SVAR Model: A Case Study

Abstract

Vietnam's economy has experienced complicated and unpredictable inflationary periods such as 1986. Therefore, the research to forecast inflation is significant in both macro and micro aspects. It not only contributes to improving the efficiency of policy administration, but it is also used towards the goal of macro stability, sustainability of economic growth, and improving the efficiency and competitiveness of enterprises and the economy. There are many quantitative studies on inflation forecasting in the world and Vietnam, notably using the SVAR multivariate models. This paper will use the SVAR model to analyze factors impacting inflation in Vietnam. Based on the data collected from 2016 to 2020, the results show that, in the short term, inflation is mainly affected by its fluctuations in the past, while the world oil price, exchange rate, and interest rate partly explain the volatility of inflation, but the contribution is tiny. On the other hand, in the long term, the influence of past inflation reduces over time, but it still explains the current fluctuation.