Effects of World Prices on Inflation. A Case Study in Vietnam

Inflation and inflation control has been concerned by many countries around the world.In order to reduce inflation, it is necessary to know the causes of inflation.There are causes originating from within the economy, but external factors cannot be excluded.For open and integrated economies, an increase in prices on the world market will also have a certain effect on domestic commodity prices.This paper examines the effects of world prices such as oil prices, gold prices and rice prices on Vietnam's inflation, over the period from January 2010 to December 2022.To estimate the time series data, the method of vector autoregression (VAR) are also used to test the relationship between world commodity prices and inflation.Besides, the stationarity of the data series, the lag of variables, the impulse response functions the Granger causality test, and the variance decomposition of variables are also used to test and provide the level of relationship between variables in the research model.The findings of the study showed that oil prices, gold prices and rice prices are positively correlated with Vietnam's inflation rate.Thereby, managers need to monitor the evolution of world prices, in order to promptly respond, as well as minimize the effects, take advantage of opportunities to control inflation, stabilize and develop the economy.