Faculty of Management and Tourism

Vietnam's

Consumer Price Index and Influencing Factors

An Econometrics Report

5/11/2012

Tutorial 2 - BA09

Lecturer: Ms. Đào Thanh Bình

Tutor: Ms. Trần Kim Anh

Group members:

Nguyễn Thị Hà Giang ID: 0904000018

Ngô Thi Mai Hương ID: 0904000039

Lê Thành Long ID: 0904000050

Bùi Thị Hương Quyên ID: 0904000072

Hoàng Minh Thành ID: 0904000082

Đỗ Đăng Tiến ID: 0904000089

Trương Công Tuấn ID: 0904000091

Nguyễn Thanh Tuyền ID: 0904000092

Acknowledgement

First and foremost, we would like to express our gratitude to all those who gave us the possibility to complete this research.

We would like to convey our sincere thanks to our lecturer Ms. Dao Thanh Binh, PhD, lecturer of Faculty of Management and Tourism, Hanoi University, for her conscientious and dedicated lectures. Without her valuable knowledge, this research cannot be accomplished.

Our deepest gratitude also goes to our beloved tutor Ms. Tran Kim Anh, master. Her devoted instructions and support were of great help. Without her heart-felt assistance and encouragement, this paper would not be able to come to this result.

Abstract

In recent years, Vietnam’s inflation has increased to an alarming rate of two-digit, ranking itself one of 5 countries having the highest inflation rate in the world. That Consumer Price Index (CPI) has incessantly escalated is the primary reason for such worrying issue. Our project, therefore, is aimed at investigating and analyzing Vietnam’s CPI by testing the impact of following factors on CPI: USD/VND exchange rate, petrol price, rice price and money supply. Henceforth, a prediction about inflation rate drawing from CPI and affecting factors analysis may be given to help us better prepare for problems that can occur as a result of distressing inflation. The model that can best illustrate relationship between the independent variables and CPI has been detected. Basing on our research, it is apparent that those four variables have a significant influence on Consumer Price Index.

Table of Contents

Acknowledgementii

Abstractiii

List of Tables and Figuresv

1. Introduction1

2. Methodology2

2.1. Method of collecting data and other sources2

2.2. Methods of processing the data2

3. Data analysis3

3.1. Consumer Price Index3

3.2. Exchange rate4

3.3. Petrol price5

3.4. Rice price6

3.5. Money supply7

4. Model specification7

4.1. Variables and relationships7

4.2. Model selection8

5. Regression interpretation and hypothesis testing13

5.1. Regression function coefficients interpretation13

5.2. Hypothesis testing13

5.2.1. Significance test of individual coefficients13

5.2.2. Significance test of overall model15

5.2.3. Test of dropping insignificant variable16

6. Errors and limitation17

6.1. Limitations17

6.2. Errors and remedials18

6.2.1. Multicollinearity18

6.2.2. Heteroskedasticity20

6.2.3. Autocorrelation21

7. Conclusion24

Appendixa

Referencesb

List of Tables and Figures

Table 1: EView regression result: Lin-lin model9

Table 2: EView regression result: Log-log model10

Table 3: EView regression result: Lin-log model11

Table 4: EView regression result: Log-lin model12

Table 5: R2 and CV comparison between models12

Table 6: EView regression result: New model16

Table 7: EView regression result: P-R,MS18

Table 8: EView regression result: R-P,MS19

Table 9: EView regression result: MS-P,R19

Table 10: EView White Heteroskedasticity Test (without cross terms)21

Table 11: EView regression result: Durbin-Watson statistic22

Table 12: Breusch-Godfrey Serial Correlation LM test: Lags 223

Figure 1: Vietnam CPI from 2000 to 20103

Figure 2: Vietnam's USD Exchange rate from 2000 to 20104

Figure 3: Vietnam's retail petrol price from 2000 to 20105

Figure 4: Vietnam's rice price from 2000 to 20106

Figure 5: Vietnam's money supply...