DOI:

Abstract

To control inflation has become the mission of the Vietnam's government throughout its close integration into the world economy. Since the 1986 hyperinflation, Vietnam has managed to maintain its inflation rate at a single-digit level in such a long period. Yet within four recent years when the economy integrated more closely into the world economy, the inflation rate has bobbed up and down and become unpredictable, from 25% in 2008 down to 6.88% in 2009; and the CPI as of December 2009 has risen to 1.38% - the highest level in 2009, set the alarm bells ringing for the reoccurrence of high inflation in 2010. In December 2010, Vietnam's GSO did admit a rise of 1.98% in the CPI, pushing the whole-year growth rate up nearly to 12%. Inflation has been the matter of concern to many of monetarists thus far. Their debates on monetary factors affecting inflation derive from a best-known assertion of Friedman that “inflation is always and everywhere a monetary phenomenon.” (Mishkin, 2003). From this perspective, preventing inflation means controlling monetary factors. This study, by means of empirical methodologies, is to investigate monetary factors impinging on inflation in Vietnam. Consequently, empirical outcomes show that variables namely income, money supply, interest rate, capital inflow, and exchange rate have sharp impacts on inflation; and their influential direction suits research hypotheses.

Keywords

Inflation; Money Supply; Interest Rate; Exchange Rate; Capital Flows.