Transmission of World Prices to the Vietnamese Economy

Abstract

International economic integration has been a central policy goal for the Vietnam government since the doi moi reform was initiated in 1986. We explore the Vietnamese increasing integration into the world market and bouts of high inflation. Five price transmission models using three levels of sectoral aggregation, examine the transmission of world price shocks to the Vietnamese domestic market and the impact of inflation on domestic prices from 1999 to 2008. Empirical results find wide sectoral variation, imperfect price transmission, non-neutral inflation pass-through, the dominant effect of inflation on domestic prices, and a low speed of adjustment to the Law of One Price. We conclude that policy analysts need disaggregated sector-level price transmission elasticities for accurate trade policy analysis and that careful attention must be paid to how inflation influences the economy. Moreover, while tariff reforms have typically been focused in many studies to come to grips with policy outcomes, the key to such

Shocks to food market systems: A network approach

“…Although the present study examined only one country and two commodities, the results may be applicable to a wider range of developing countries, especially those prone to food price shocks. Indeed, our results are relevant to the concerns raised by the literature that has analyzed food markets (e.g., Abbott, Wu, & Tarp, ; Badiane & Shively, ; Barrett, ; Fackler & Goodwin, ; Ravallion, ; Sen, ; Timmer, Falcon, & Pearson, ; Jayne et al. ).…”

Distributional impacts of the 2008 global food price spike in Vietnam

“…In a later study for Vietnam, Vu and Glewwe (2011), applying Deaton's (1989) approach, find a net positive welfare effect of the food price increase; the average decrease in welfare for those made worse off is more than offset by the average increase in welfare for those that gain. In addition, Abbott et al (2012) show wide sectoral variation and imperfect price transmission from world prices to domestic markets from 1999-2008. Thurlow et al (2011) develop a dynamic computable general equilibrium to decompose impacts of the global commodity and financial crisis.…”

“…In contrast, the role of technical progress has tended to be discounted. However, Abbott et al (2012) estimate that a significant share of the difference between GDP and employment growth is due to technical change, including technical progress in agriculture.…”