Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/197106
Authors: 
Bui, Minh Tam
Year of Publication: 
2018
Citation: 
[Journal:] Economies [ISSN:] 2227-7099 [Volume:] 6 [Year:] 2018 [Issue:] 4/68 [Pages:] 1-20
Abstract: 
As in many transition economies, Vietnam has experienced a multiple exchange rate system with three exchange rates having co-existed. This paper uses the Vector-Error-Correction model and the Granger tests to investigate the relationship between the official and black market exchange rates from January 2005 to April 2011. The results confirm a long-run relationship between the official and parallel market rates of the Vietnam dong against the U.S. dollar. The short-run dynamics of two exchange rates suggest that the official exchange rate causes the black exchange rate, but not vice versa. This conclusion is valid for both a sub-period of stability and a sub-period of vibrant fluctuations, with February 2008 as the cut-off. The findings also reject the efficiency hypothesis of the black market for foreign exchange and support the policy choice of the State Bank of Vietnam not to follow black market signals in managing official exchange rates for macroeconomic stability.
Subjects: 
parallel market
exchange rate dynamics
black market
causality
inflation
JEL: 
F31
E52
E58
C32
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Article

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