The impact of international oil prices on the industrial production index in Vietnam

Abstract

This thesis focus on analyzing the impact of oil prices on the industrial production index in Vietnam. Beside the impact of international oil prices, the paper also uses other variables such as real money supply, real exchange rate and structural break in order to find out the relationship between these variables and industrial production index. The data of those variables is monthly data, from January 1999 to December 2011. Regarding the methodology, the linear regression model and error correction model suggested to apply for balanced data set. The test results show that oil prices fluctuation have positive impact on the economic activities throughout the industrial production index in the long run. Based on that, the Vietnamese economy can adjust itself to adapt with the fluctuation of the international oil prices in the long run. In contrast, real money supply and real exchange rate have negative impact on the industrial production index. Additionally, the economy is divided by two periods: before and after financial crisis that is represented by dummy variable. However, this division cannot explain the economic activities. In the short-run, there is only real money supply could be the adjusted parameter for changing of industrial production index.