Effectiveness of the exchange rate channel: the case of Vietnam

Abstract

Stability of Vietnam exchange rate and foreign exchange market has remarked an important achievement since 2012. The paper aims at evaluating effectiveness of exchange rate channel of monetary mechanism in Vietnam during 2005-2014. It is structured as follows. The first part analyses development of exchange rate (USD/VND) as well as Vietnam exchange rate policy in 2014. By employing VAR model, the author evaluates effectiveness of exchange rate channel in Vietnam over past ten years. Finally, policy recommendations are suggested for the State Bank of Vietnam.