The response of monetary policy to positive and negative oil price shocks: The case of Vietnam

Abstract

The study examines the response of monetary policy to positive and negative oil price shocks by
employing structural vector autoregression (SVAR) model and monthly data of Vietnam for the period between
2009M1 and 2021M12. The oil price shock is considered exogenous and is included in the SVAR system as a
univariate regression equation. The results show that monetary policy would tighten to control inflationary pressure
when a positive oil price shock occurred, but would keep unchange under a negative oil price shock. In addition,
monetary policy only responses to positive oil price shocks accompanied by high inflation pressure during the
shock period