Pro-growth Policies and Inflation in Vietnam in the Period of 2008-2011
In the last decade, Vietnamese economy has always been battling with inflation and recently hyperinflation. Among many causes, the growth in credit activities of commercial banks is what worsens the situation. In a caucus in December 2010, the Head of Central bank Giau Nguyen plans a 23% credit growth for 2011. At the same time, the government chose monetary policies that aimed at a 7% -7.5% growth rate target, a relatively high rate for a 100-billion-dollar-worth economy. Those policies soon turned out to worsen the inflation. Starting from December 2010, Vietnam suffered a double-digit inflation, the highest in Southeast Asia and in top five of the world. By the end of August 2011, the inflation rate in Vietnam passed 20% and was the second highest in the world after Venezuela. What have caused inflation and what are the right policies for Vietnam at this time? The answer to these two questions is the thesis of my paper. Methodologies used in this paper include analysis on economic theories and concepts. Materials used are journal articles, academic sources such as textbooks and experiences from work.
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