Year: 2020
Type: article
Abstract: We develop a New Keynesian model featuring Calvo price setting and Calvo wage setting to quantify the welfare consequences of shifting trend inflation in Vietnam. To capture the characteristics of the Vietnamese economy, we use the Simulated Method of Moment and calibrate parameters jointly to match the important selected moments of Vietnamese data. The results show a severe consequence of a constant positive trend inflation and an exogenous shock to trend inflation, especially when a central bank sets a high level of inflation target. Among staggered price and wage contracts, the latter play a vital role in transmitting the adverse impacts of constant and shifting trend inflation into the economy. Based on our analyses, raising inflation targets would seem to be a bad policy prescription in Vietnam.
Authors: Le Thanh Ha, To Trung Thanh, Doan Ngoc Thang
Institutions: National Economics University, Banking Academy of Vietnam
Language: English
Domain: Social Sciences
Open Access status: gold
Estimated APC paid: $944
OpenAlex ID: W3017608262