Inflation forecast on the basis of monetary variables

Abstract

In this article, we will propose a model of inflation forecasting for the Vietnamese economy in the short run (with a one year forecast period) based on monetary variables, including money supply M2 and interest rates. This model, then, will be used to make out of sample for 2010-2014. The projection results suggest that the model can be used as a useful reference tool for monetary policy making, especially during times of volatile inflation.