Our econometric analysis further confirms that Vietnam shows a much higher degree of
persistence in inflation than in other emerging market Asian economies. More specifically,
they suggest that a one percentage point of past inflation is associated with an inflation
increase of about 0.87 in the current period in Vietnam—0.51 percentage points higher than
our sample average. This may reflect sluggish adjustment of inflationary expectations, and/or
monetary policy that is more accommodative in Vietnam compared to the other countries.
Furthermore, the evidence indicates that lagged GDP growth, and lagged movements of the
nominal effective exchange rate, had an important impact on headline inflation in Vietnam,
unlike in the other countries in the region, over the sample period 2004Q1–2012Q2. Foreign
inflation, as proxied by movements in the import price deflator, also seems to have a
somewhat stronger impact in Vietnam compared with other emerging market economies in
Asia.
Our econometric analysis further confirms that Vietnam shows a much higher degree of
persistence in inflation than in other emerging market Asian economies. More specifically,
they suggest that a one percentage point of past inflation is associated with an inflation
increase of about 0.87 in the current period in Vietnam—0.51 percentage points higher than
our sample average. This may reflect sluggish adjustment of inflationary expectations, and/or
monetary policy that is more accommodative in Vietnam compared to the other countries.
Furthermore, the evidence indicates that lagged GDP growth, and lagged movements of the
nominal effective exchange rate, had an important impact on headline inflation in Vietnam,
unlike in the other countries in the region, over the sample period 2004Q1–2012Q2. Foreign
inflation, as proxied by movements in the import price deflator, also seems to have a
somewhat stronger impact in Vietnam compared with other emerging market economies in
Asia.
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