FACTORS AFFECTING THE FLUCTUATION OF EXCHANGE RATE IN VIETNAM

ABSTRACT This article provides a brief overview of exchange rate and exchange rate mechanism in Vietnam over the last time. In addition, the author applies GARCH model to calculate the fluctuation of the real exchange rate and the correction model to examine the effect of factors on the fluctuation of exchange rate. The article found that most of the factors taken into account, such as economic growth, interest rate, money supply and nominal exchange rate, affect the fluctuation of the real exchange rate. Based on that, according to the author, the State Bank of Vietnam should control the real exchange rate instead of controlling the nominal exchange rate as it currently does, and appropriate measures should be taken for macro variables to minimize impacts on fluctuation of exchange rate. Keywords Exchange rate, amplitude, real exchange rate, nominal exchange rate, the State Bank of Vietnam.