The impact of oil prices on the economy of Vietnam

Abstract

In this paper we study the relationship between oil prices and macroeconomic performance by investigating the impact of oil price shocks on key macroeconomic variables of Vietnam over the 2001–2012 period. In order to test the relationship between oil prices and the value of industrial production, we use cointegration method to consider the long-term relationship and Error Correction Model (ECM) to ponder the short-term one. The test results show that the price of oil and the value of industrial production in Vietnam are positively correlated in the long term, whereas in the short term the volatility of oil prices in the last two months will negatively affect the fluctuation in the value of the current industrial production.