The role of the REER and some policy implications in Vietnam

Abstract

Over the past years, the State Bank of Vietnam (SBV) has flexibly changed the exchange rate management mechanism. From the beginning of 2016, the State Bank started to shift to a new exchange rate policy- the central rate. In the context of deeply intergration into the global economy, the Vietnamese financial monetary market and the exchange rate tend to be increasingly volatile and vurnerable. A Real Effective Exchange Rate (REER) - which can provide useful information in the analysis, decision-making, evaluation of macroeconomic policies as well as measures related to the exchange rate, but has not been officially published in Vietnam. This research aimed to evaluate the current situation of exchange rate management in Vietnam, estimate the REER in the period 2000- 2019 and analyze the role of REER in macroeconomic management through empirical studies and modeling method (impact simulation by NIGEM global econometric model). The research results show that REER should be a userful tool in the administration of exchange rate policy in Vietnam.