Dollarization in Vietnam
Executive Summary
This report is written to analyze the dollarization in Vietnam, including the causes, current situation, its effects in the domestic economy and some proposed solution to minimize the dollarization.
According to the standard set up by IMF, Vietnam is considered as one of countries that have underwent the dollarization. Also, in IMF’s judgment, among three types of the dollarization, our country’s current situation is on the way of unofficial dollarization.
About the reasons of this phenomenon, Vietnamese people still have not had the confidence in the government’s monetary policies, resulting in their concern for the dong depreciation. Besides, a massive increase of the foreign currency, say USD, in the daily trading market also makes the dollarization more popular in the domestic economy.
The dollarization has exerted both positive and negative impacts on the economy. In particular, the latter draws more attraction from the government and the central bank due to its interference with the economic growth. That is the dollarization has led to the instability of foreign exchange market and the difficulty in monetary policy determination.
To reduce the dollarization, the government has implemented some strategies related to the monetary and investment policy. It aims at increasing the dong value by adopting interest rate reform and also collecting the amount of dollars in the market through some big investment projects as well as financial instruments issue of commercial banks.
Table of Contents Executive summary i List of figures iii
1. Introduction 1
2. Overview about dollarization 1
2.1. Definition 1
2.2. Types 1
2.3. Causes 2
3. Current situation of dollarization in Vietnam 2
4. Effects to the economy 4
4.1. Negative effects 4
4.2. Positive effects 5
5. Government’s proposed solutions 6
6. Conclusion 7
References 8
List of figures
Figure 1. The fluctuation of the exchange rate USD/VND 4
Figure 2. FCD/M2 – Savings
This report is written to analyze the dollarization in Vietnam, including the causes, current situation, its effects in the domestic economy and some proposed solution to minimize the dollarization.
According to the standard set up by IMF, Vietnam is considered as one of countries that have underwent the dollarization. Also, in IMF’s judgment, among three types of the dollarization, our country’s current situation is on the way of unofficial dollarization.
About the reasons of this phenomenon, Vietnamese people still have not had the confidence in the government’s monetary policies, resulting in their concern for the dong depreciation. Besides, a massive increase of the foreign currency, say USD, in the daily trading market also makes the dollarization more popular in the domestic economy.
The dollarization has exerted both positive and negative impacts on the economy. In particular, the latter draws more attraction from the government and the central bank due to its interference with the economic growth. That is the dollarization has led to the instability of foreign exchange market and the difficulty in monetary policy determination.
To reduce the dollarization, the government has implemented some strategies related to the monetary and investment policy. It aims at increasing the dong value by adopting interest rate reform and also collecting the amount of dollars in the market through some big investment projects as well as financial instruments issue of commercial banks.
Table of Contents Executive summary i List of figures iii
1. Introduction 1
2. Overview about dollarization 1
2.1. Definition 1
2.2. Types 1
2.3. Causes 2
3. Current situation of dollarization in Vietnam 2
4. Effects to the economy 4
4.1. Negative effects 4
4.2. Positive effects 5
5. Government’s proposed solutions 6
6. Conclusion 7
References 8
List of figures
Figure 1. The fluctuation of the exchange rate USD/VND 4
Figure 2. FCD/M2 – Savings
References: 3. Article:“Vietnam plans to end dollarization completely by 2013”, May 19, 2011 http://english.vietnamnet.vn/en/business/8400/vietnam-plans-to-end-dollarization-completely-by-2013.html 4. Sacombank, “Putting an End to Dollarization”, November 15, 2012 http://www.sacombank.com.vn/en/news/Pages/Putting-an-End-to-Dollarization.aspx 11. Lam, N. 2012. First movement of easing dollarization [Online]. Chinhphu.vn. Available: http://baodientu.chinhphu.vn/Home/Buoc-dau-hoa-giai-vang-hoa-do-la-hoa/201211/153539.vgp [Accessed 25/11 2012] Report Marking Sheet