Gold price and inflation in Vietnam

Abstract

This study had tried to compose the obvious movements of gold price in both longrun and short-run periods. The experimental model suggested the conditions that would be satisfied with the increase in gold price over time at the general inflation rate and hence gold would be an long-run effective hedging asset against the inflation. Also, the model determined that the short-run fluctuations of explanatory factors such as the world gold price, the USD/VND exchange rate, the betas of gold, the interest rate and the impacts of Government’s policies on Vietnam gold price can extremely interrupt the equilibrium relation and create the significant volatility of gold price in the short term. Using monthly data from January 2007 to December 2014 and applying the cointegration regression and VECM approaches, the practical investigation confirms the fundamental hypotheses of the research model.