Impact of financial condition index on inflation: the case of Vietnam

Abstract

This paper investigates the impact of the financial condition index on inflation in Vietnam by using
the Autoregressive- Distributed Lag Model (ARDL) combined with a time series dataset from January 2013
to December 2022. Research results show that loosening financial conditions will put pressure on inflation
in the short term but not in the long term. In addition, the oil price and M2 money supply also have a positive
impact on Vietnam’s inflation. On that basis, this paper also proposes policy recommendations to improve
the effectiveness of monetary policy in Vietnam