Estimating the threshold level of inflation for economic growth in Vietnam

Abstract

Proceeding from the concern about the unreasonable level of inflation could be harmful to economic growth as well
as the dynamical changes in orienting monetary policy to inflation targeting framework in both developing countries
and emerging markets, according to those, the objective of this study is aim to estimate the optimal level of inflation
(or inflation threshold) for economic growth in Viet Nam that relies on the basis of models developed by Sarel (1995),
Khan & Senhadji (2000) and Mubarik (2005). The research methods include tests like Augmented Dickey- Fuller (ADF),
Phillip- Perron (PP), Granger Causility and regression analyses like Odinary Least Square (OLS), Two Stage Least
Square (2SLS), Generalized Method of Moments (GMM) with quarterly time series data covered the period from 2004-
2014. The result showed inflation threshold is 7% that makes significant contribution to establishing inflation target
range for State Bank of Vietnam (SBV) in the coming time.