Currency Policy - International Experiences and Lessons for Vietnam

Authors

  • Vu Ngoc Xuan Director Centre, Faculty of Economics, National Economics University, Hanoi, Vietnam

Keywords:

independent monetary policy (monetary independence), world trade organization(WTO), full capital controls, impossible trinity

Abstract

In recent times, Vietnam has been successful in maintaining a currency policy aimed at stabilizing the exchange rate, macroeconomic stability, and inflation remained at a low number. In 2012, Vietnam exported 284 million dollar trade, balance of payments surplus of 9.1 billion dollars, foreign exchange reserves doubled to reach about 30 billion dollars. Vietnam and other countries are faced with the globalization of the financial markets in 1990-2000, thereby reducing the stability of the exchange rate and policy autonomy of states. An unintended consequence of financial globalization is the loan with the costly expense of developing countries and the debt crisis. Countries with emerging markets responded by choosing monetary policy with the aim of controlling cash flow for the three policy impossible, integrate their finances with rising foreign exchange reserves, as self-insurance means the integration into the global financial system. Policy impossible trilogy (the ability to perform only two of the three policy goals - free flow of capital, exchange rate stability and an independent monetary policy) continues to be a model of management policy in macroeconomics. This article, the authors use the model impossible trinity of Robert Mundell and Marcus Fleming model (Mundell - Fleming) to explain the objectives of monetary policy Vietnam period before the WTO (1990 -2007), and after joining the WTO (2007 - present). The author updates the national experience of the world and draw lessons options for monetary policy in Vietnam in the coming time.

 

References

Aizenman J. and Lee J. (2007). International Reserves: precautionary versus mercantilist views, theory and Evidence, Open Economies Review, 18, 191-214.

J Aizenman, Chinn and Ito H. MD (2010). The Emerging Global Financial Architecture: Tracing and Evaluating the New Patterns of the Trilemma configuration, Journal of International Money and Finance, 29, 4: 615-641.

GA Calvo and Reinhart, CR (2002), the fear of floating, Quarterly Journal of Economics, 117, 379-408. Calvo, GA 2006. "Monetary Policy Challenges in Emerging Markets: Sudden Stop, Liability Dollarization, and Lender of Last Resort, " Working Paper 12 788, National Bureau of Economic Research.

Cheung YW and H. Ito (2009), Cross-sectional analysis on the determinants of Reserves accumulation international, forthcoming, International Economic Journal

Chinn D. M, Dooley PM (1997), financial repression and capital mobility: why capital flows and covered interest rate differentials fail to measure capital market integration, Monetary and Economic Studies, December. 81-103

Edwards S. (2007). "Capital Controls, Sudden Stops, and Current Account Reversals." In Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, edited by S. Edwards. Chicago: University of Chicago Press.

Eichengreen B., Hausmann, R., Panizza. U. (2005), the Pain of Original Sin in Other Peoples’ Money, edited by

Eichengreen B. and Hausmann R. Chicago: University of Chicago Press, pp. 13–47.

Frankel, J. A. (1999). No single currency regime is right for all countries or for all times. Princeton Essays in international Finance No. 214, August.

Frankel, J. A., Schmukler S. L. And Servén L. (2004), Global Transmission of Interest Rates: Monetary Independence and Currency Regime. Journal of International Money and Finance, 2004, 23, 5:701-733.

Mundell, R. A, the Prize in Economics 1999 - Press Release.

Obstfeld, M., Shambaugh, J. C, and Taylor, A. M. (2005). The Trilemma in History: Tradeoffs among Exchange Rates, Monetary Policies, and Capital Mobility, Review of Economics and Statistics, 87, 423–38.

_________ (2010), Financial Stability, the Trilemma, and International Reserves. American Economic

Journal: Macroeconomics, 2: 57-94.

Rodrik, D. (2006). “The Social Cost of Foreign Exchange Reserves.†International Economic Journal 20: 253–66.

Rogoff, K. and Obstfeld, M. (1995). "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, 9: 73-96.

The Impossible Trinity, Joshua Aizenman, University of California, Santa Cruz, May 2010.

To Trung Thanh, testing the impossible trinity in Vietnam and implied policy options in the short and long term, Journal of Development Economics, National Economics University, 9.2012.

Nguyen Tran Phuc, Nguyen Duc Tho, “exchange rate policy in Vietnam from 1985 to 2008â€, 2009

Vu Ngoc Xuan, “application elasticity to successful investment in Vietnam's stock marketâ€, Journal of Development Economics, National Economics University, 9.2012

Downloads

Published

2013-12-13

How to Cite

Xuan, V. N. (2013). Currency Policy - International Experiences and Lessons for Vietnam. Asian Journal of Business and Management, 1(5). Retrieved from https://www.ajouronline.com/index.php/AJBM/article/view/648