Evaluation of exchange rate policy based on exchange market pressure: the case of Vietnam

Abstract

Unlike the period 2012- 2014, the stability of the exchange rate and Vietnam’s foreign exchange market encountered
unexpected challenges from both internal and external shocks in 2015. However, once again, active and flexible exchange
rate policy implemented by the State Bank of Vietnam (SBV) has contributed significantly in stabilizing the value of
Vietnam dong (VND. In the first section, the paper summarizes and analyzes causes of exchange rate development in
2015. After introduction of exchange market pressure index (EMP), the author evaluates exchange rate policy measures
in 2015 in terms of EMP index in the Section 2. The last section argues advantages and disadvantages of a “new
exchange rate arrangement” the BBC (Basket-Band-Crawl) implemented by the State Bank of Vietnam in 2016.