DOI:

Abstract

Even though every country nurtures a desire to attain a sustainable economic growth (i.e. a high growth rate, a low inflation rate, and a stable exchange rate), it is not an easy task. Vietnam thus far has pursued the target of high growth rate, while its inflation rate and exchange rate is perplexedly fluctuating and hard to control. One of the main excuses for the high appreciation in commodity price in Vietnam is the rise in the price of crude oil, food, and materials for industries in the world market. The high inflation rate will adversely depreciate the value of domestic currency. The discrepancy between official and unofficial exchange rates to the USD has been closed by the SBV. Albeit such the adjustment in the exchange rate will help stabilize the forex market and facilitate the exportation, Vietnam may also be exposed to a high inflation rate and upheavals in the money market. Thus, in order to ensure macroeconomic stability with controlling inflation as the central task, and secure social welfare as set forth in the Resolution 11/NQ-CP dated Feb. 24, 2011, it is necessary to analyze reasons of inflation and gaps in exchange rate and find appropriate solutions to these problems.

Keywords

Vicious Circle; Exchange Rate; Inflation