Vietnam inflation causes and solutions,graduation thesis

STATE BANK OF VIETNAM BANKING ACADEMY FOREIGN LANGUAGE FACULTY - - GRADUATION THESIS VIETNAM INFLATION: CAUSES AND SOLUTIONS STUDENT LECTURER CLASS COURSE : NGUYEN THUY DUONG : NGO TUNG ANH (MR), MA, MBA : K15ATCB : 2012-2016 May 2016 STATE BANK OF VIETNAM BANKING ACADEMY FOREIGN LANGUAGE FACULTY - - GRADUATION THESIS VIETNAM INFLATION: CAUSES AND SOLUTIONS STUDENT LECTURER CLASS COURSE : NGUYEN THUY DUONG : NGO TUNG ANH (MR), MA, MBA : K15ATCB : 2012-2016 May 2016 i DECLARATION I hereby declare that this thesis is the product of my own and effort It has not been applied for any degree or previously submitted anywhere for any award All the sources I have used have been indicated and acknowledged by means of complete references Signature Nguyen Thuy Duong ii ACKNOWLEDGEMENTS I would like to express my gratitude to all those who gave me the possibility to complete this thesis I express thanks to all the lecturers from the Faculty of Foreign Languages at Banking Academy for the professional support as well as to Mrs Nguyen Thi Hong Mai, Dean of this faculty for introducing me to the topic as well for the support on the way I would also like to show my great appreciation to my supervisor, Mr Ngo Tung Anh (MA, MBA), Vice Dean of the Faculty of Foreign Languages, for the useful comments, remarks and encouragements through the learning process of this thesis The door to Mr Tung Anh‟s office was always open whenever I ran into a trouble spot or had a question about my research or writing He consistently allowed this paper to be my own work, but steered me in the right direction whenever he thought I needed it Unforgettable thanks will go to my family for the love, affection, and support; they have extended me every step of my life Without the help of all these persons, it would never have been possible to realize this bachelor thesis iii ABSTRACT In the development process of the economy of countries in the world in general and Vietnam in particular, the inflation problem has always been a major concern of many countries because it has an important impact on the development of the economy Inflation is not only one of the indicators to assess the level of economic development of a country, but also one of the major obstacles in the development process of the country The more the country‟s economy is diversified and has developed increasingly, the more the causes of inflation is intricate Therefore, in the development process of socialist- oriented market economy in our country, the research on the causes, movements in order to come out with the necessary measures to control the inflation is essential and plays an important role to contribute to the country‟s construction and development The research topic is the inflation in Vietnam The thesis brings out tables, statistics about the inflation situation in Vietnam along with the comparison, assessment, synthesis and analysis based on such data, thereby, to understand more about the theoretical issues of inflation, the causes and the inflation situation in recent years along with the success and limitation of Government's solutions in the meantime iv TABLE OF CONTENTS PART A: INTRODUCTION PART B: DEVELOPMENT CHAPTER 1: GENERAL VIEW OF INFLATION 1.1 Definition of inflation 1.2 Inflation‟s scale 1.2.1 Moderate inflation 1.2.2 Galloping inflation 1.2.3 Hyper inflation 1.3 Inflation‟s measurement 1.3.1 CPI- Consumer Price Index 1.3.2 PPI- Producer Price Index 1.3.3 DGDP- GDP deflator 1.4 Causes of inflation 1.4.1 Demand- pull inflation 1.4.2 Cost- push inflation 10 1.4.3 Anticipated inflation 11 1.4.4 Import and export inflation 12 1.4.5 Other subjective and objective causes 13 1.5 Inflation impact on the economy 13 1.5.1 Impact on the productivity 13 1.5.2 Impact on the income allocation between parties 14 1.5.3 Impact on the economy structure 15 1.5.4 Impact on the economy efficiency 15 1.6 Sub-conclusion 16 CHAPTER 2: THE REALITY OF INFLATION IN VIETNAM 17 2.1 Inflation situation in the world 17 2.1.1 Some worst cases of hyper inflation in history 17 2.1.2 Inflation situation in the world 23 2.2 Inflation situation in Vietnam 28 v 2.2.1 Inflation situation in 2010 28 2.2.2 Inflation situation in 2011 29 2.2.3 Inflation situation in 2012 33 2.2.4 Inflation situation in 2013 36 2.2.5 Inflation situation in 2014 39 2.2.6 Inflation situation in 2015 43 2.2.7 Inflation situation in early 2016 and forecast in the future 46 2.2.8 Sub-conclusion 49 CHAPTER 3: SOLUTIONS AND RECOMMENDATIONS 50 3.1 Implementation of tight monetary policy 50 3.2 Reducing the public investments and recurrent costs, strictly controlling the investment of state-owned enterprises, trying to reduce the budget deficit 51 3.3 Concentrating on the development of agriculture and industry, overcoming the consequences of the weather and epidemics 52 3.4 Ensuring the balance of the supply and the demand for goods, boosting export, and reducing the excess of imports over exports 52 3.5 Thoroughly saving in production and consumption 54 3.6 Strengthening the market management and controlling the observance of law in prices 54 3.7 Expanding the implementation of policies on social security 55 3.8 Sub-conclusion 56 PART C: CONCLUSION 58 Recapitulations and concluding remarks 58 Implication of the study 58 Limitation and proposal for further study 59 REFERENCES 60 vi LIST OF TABLES AND FIGURES Figure 1.1: Demand-pull inflation mechanism – Source: Investopedia.com Figure 1.2: The process of cost-push inflation – Source: Investopedia.com 10 Figure 1.3: The process of anticipated inflation – Source: Investopedia.com 11 Figure 2.1: Global inflation from 1920 to 2015 - Source: IMF 24 Figure 2.2: World Economic Growth - Source: IMF 26 Table 2.1: Statistical Table of GDP growth rate and average level of inflation in the world and some typical countries of the world represented in 2016 along with the period from 2017 to 2021 in relation with the figures of 2014 and 2015 – Source: IMF 27 Figure 2.3: Inflation in 2010 (%) – Source: GSO 28 Figure 2.4: Inflation in 2011 – Source: GSO 29 Figure 2.5: Inflation from 2009 to 2012 (%) – Source: dantri.com.vn 35 Figure 2.6: Prices of domestic commodities in the period of 2010-2014 (%)- GSO 40 Figure 2.7: Inflation growth rate in the period from 1997 to 2014 - Sources: GSO 41 Figure 2.8: Proportions of commodities groups in CPI in 2014 – Sources: GSO 41 Figure 2.9: Movements in the price index in 2015 – Source: GSO 43 Figure 2.10: The growth rate of commodities’ prices in the period from 2006 to 2015 – Source: GSO 44 Figure 2.11: The changes of CPI over months - Sources: GSO 47 vii LIST OF ABBREVIATIONS - CIs: credit institutions - DM: Deutsch Mark - GSO: General Statistics Office - IMF: International Monetary Fund - SBV: State Bank of Vietnam - VAMC: Vietnam Asset Management Company - VAT: value added tax - VEPR: Vietnam Centre for Economic and Policy Research - WTO: World Trade Organization PART A: INTRODUCTION Rationale to the thesis Ever since appearing, the inflation has always been recognized as a major topic of concern in each economy as well as the global economy The restraint of inflation plays an important role in the development strategies of each country due to the fact that it directly affects the benefit of individuals and organizations as well as the government After the reunification, Viet Nam went through periods of ups and downs of inflation Beginning at not being officially acknowledged in the global economy in the early years of national liberation, the economy of Viet Nam suffered significantly by the hyperinflation in 1986-1988, followed by a period of deflation as well However, the inflation in our country sprung back after the opening of the economy and participating in the World Trade Organization In 2007, one year after becoming an official member of the WTO, the consumer index up to 12.6% marked the galloping inflation‟s comeback In the first five months of 2008, the inflation rate had exceeded the annual inflation target set by Congress and the inflation rate for the whole of last year It seemed that the economy was growing too rapidly and could not take advantage of all of its opportunities Additionally, it was due to the problems in the financial and monetary system as well as the lack of consistency in the government policy that led to the current situation of inflation The requirement is to identify the proper causes of inflation in our country to bring out possible solutions and make predictions for the best preparation for the economy in the coming period Deriving from the reliable requirement and through the research about this issue in the learning process as well as in practice, I have decided to choose this topic for my graduation thesis 46 Difficulty in rice exportation influenced wholesale and retail prices of rice to decrease Thereby, in 2015, price index of food group fell by 1.24% compared to the end of 2014 Another factor worth being mentioned was the demand for consumption did not actually increase After the period of significant increase in prices, while the income of most people did not go up respectively, people were more cautious about spending than before With the goal of macroeconomic stability, inflation control, transformation of the economic growth pattern from extensive to intensive, improvement of investment efficiency and labor productivity, the year 2015 was a year of great significance It was the last year to implement the plan of economic and social development within years from 2011 to 2015 and implement solutions actively to keep macroeconomy stable and control the inflation Specifically, the sector of Industry and Trade in collaboration with the relevant agencies instructed the commercial enterprises to store commodities, participating in stabilizing the market serving the Lunar New Year so as not to occur sudden price increase during Tet SBV also set the flexible interest rate and exchange rate in line with the macroeconomic situation Besides there were also psychological factors, people were more careful and cautious when spending money Therefore, the suppliers of goods and services did not raise prices before, after and during Tet or festivals as in previous years 2.2.7 Inflation situation in early 2016 and forecast in the future At the announcement of quarterly report of the first quarter in 2016, Dr Nguyen Duc Thanh - Director of the Institute for Economic and Policy Research (VEPR) said: “The fluctuations of the world economy combined with internal factors in the country will make inflation become an unpredicted variable during the remaining period of 2016.” 47 Figure 2.11: The changes of CPI over months - Sources: GSO According to Mr.Thanh, inflation tends to increase again in the first months The CPI exceeded 1% in February and reached 1.69% at the end of the first quarter This growth rate is due to the adjustment of medical and educational prices in early March According to the calculation of GSO, the adjustment of prices of medicine and health services made the CPI rose by 1.27 percentage points in March Educational group contributed 0.66 percentage points because of an increase in tuition in provinces under Decree No 86/2015 / ND-CP Meanwhile, the remaining items followed the cycle of decline after Tet; the core inflation had a downward trend from 11/2015 and stood at 1.64% at the end of the first quarter of 2016 This indicates that inflationary pressures in 2016 will come more from the group of items managed by the state (health care and education) According to Circular No 37/2015, next adjustment will take place at the beginning of QIII of 2016 Though, the increase in tuition fees in some provinces may also take place, along with the recovery of oil prices, creating significant pressures on inflation right in QII of 2016 There are changes in the global economy, but not out of the forecast, and these changes may have an impact on Vietnam's economy The most notable is that the 48 prices of oil and some commodities show signs of recovery, although it is less likely to rise sharply in the near future This combining with the internal factors in the country will make inflation become an unpredicted variable in the remaining period of 2016 Disagreeing with the statement that the cause of inflation is the rising prices of some products and services like Mr.Thanh mentioned, an economic expert, Dr Vu Dinh Anh said that the inflation rate cause in 2016, besides price factors, will also be budget deficit which is an important factor When budget deficit occurs, there are either foreign borrowings or domestic borrowings If they make loans inside the country, they have to compete with businesses by raising interest rates The statement of the Mr.Anh received the consent of Mr Truong Dinh Tuyen, the former Minister of Industry and Trade Mr Tuyen also said that an important reason to push inflation in 2016 was due to the impact of currency factors However, Mr Tuyen reckons that people should not be too worried about inflation of 2016 because it is not bad if we can maintain the economic growth rate higher than inflation The report of The Economist magazine about the situation in Vietnam in March also made comments: “Inflationary pressures in Vietnam still remained hidden this year Prices will increase at a slightly faster rate Inflationary pressures from the demand will also be stronger” However, the Economist believes that the rate of inflation from now to 2018 will be moderate, not like the situation in the period 2011-2015 They also predicted that the State Bank would take actions to control the inflation not to rise suddenly by tightening monetary policy implemented in 2017 and 2018 Therefore, not coincidentally, in the economic report of 2015 and 2016 prospect recently sent to the National Assembly, one of the key tasks set out by the Government is still operate monetary policy actively and flexibly, in close 49 coordination with fiscal policy and macro-economic policies, aiming at controlling inflation rate following the targets, stabilizing the macroeconomics and supporting the economic growth at a reasonable level 2.2.8 Sub-conclusion The inflation situations in the world in general and in Vietnam in particular have been very complicated In general, after many serious cases of hyperinflation in the world in history, in 2015, the average inflation rate was just under 2%, with a slight decrease compared to 2014 It is expected to increse in developed countries and decline in developing countries Particularly, in Vietnam, after the financial crisis in 2008, the Government made a great attempt to control the inflation and stabilize the macro-economy The inflation rate in 2010 and 2011 still followed a trend of considerable rise because of many reasons However, the increase level of CPI in 2012 was said to be much lower than these level in 2010 and 2011, but the inflation this year was more volatile anomaly Vietnam was attempting to transform the economic growth pattern from extensively to intensively, but this transition required time which was still an important factor to economic growth After that, in 2013, CPI rose averagely by 6.6% compared to 2012 Consequently, 2013 was the year having the lowest CPI growth rate within the last 10 years which showed a sign of improvement Inflation in 2014 continued to maintain at a low level, in line with the general evolution of inflation trends in the region This was the first time in the past ten years having inflation rate lower than the economic growth rate, contributing to improvement of the quality of people‟s lives and the value of domestic currency According to the data from GSO, in 2015, the CPI rose by 0.63% compared to 2014 This was the lowest figure within 15 years, and much less than the inflation target approved by the Congress this year However, in 2016, inflation tends to increase again in the first months However, it is predicted that the State Bank would take actions to control the inflation not to rise suddenly by tightening monetary policy implemented in 2017 and 2018 50 CHAPTER 3: SOLUTIONS AND RECOMMENDATIONS 3.1 Implementation of tight monetary policy Even inflation is due to many causes, these always include monetary problem The supply of money in circulation and credit outstanding increase continuously and this is also an important cause of inflation in our country Being aware of this situation, the government plans to control strictly the means of payment and the total credit outstanding SBV flexibly uses tools of monetary policy rationally according to market principles in order to meet this requirement It should be emphasized that while tightening monetary policy resolutely, it is needed to ensure the liquidity of the economy and activities of banks and credit institutions, which enables the development of goods‟ production and export Active, flexible and efficient management of monetary policy tools, particularly interest rates and money supply, can control the inflation The government manages flexibly the exchange rate and foreign exchange market, in line with market changes; strengthens the foreign exchange management; implements necessary measures that allows organizations and individuals to sell and buy foreign currency to and from banks when they have a reasonable demand; ensures foreign currency liquidity; stabilizes the exchange rate to meet the requirements of stability, production development and an increase in foreign exchange reserves The government coordinates closely with the Ministry of Public Security, Ministry of Industry and Trade, the People's Committees of provinces and cities under central authority and the inspection authorities in order to monitor the compliance with the regulations on foreign exchange trade and gold sales They also implements regulations on punishments of offence, provisions of commending and rewarding for the detection of violations of foreign currency and gold trading and severely penalizing according to the law for acts of intentional violation 51 3.2 Reducing the public investments and recurrent costs, strictly controlling the investment of state-owned enterprises, trying to reduce the budget deficit Investments from the state budget and investments of state-owned enterprises account for about 45% of total social investment Cutting down these investments will reduce the demand pressure, as well as the excess of imports over exports, and contribute to improvement of the economy efficiency The government will specify the proportion of investment capital and administrative costs to cut and ask ministries and localities to identify inefficient or unneeded projects to have a suitable adjustment This will be firmly done by reallocating and balancing of funds, along with closely examining the investments of state-owned enterprises and consistently removing inefficient investment Strengthening the inspection and supervising in the management of tax collection, combating against tax evasion; focusing on handling tax debts; implementing coercive measures to recover tax debts and limit newly incurred debts The heads of enterprises, localities, and organizations that use state budget are responsible for minimizing the costs of conferences, seminars, business trips There will be no additional cost out of expectation, except for the cases comply with policies and regulations to prevent and overcome consequences of natural disasters or epidemics Any offences should be punished severely and promptly It is necessary to reduce the state budget over-expenditure by closely monitoring the borrowing and repayment of foreign loans by enterprises, especially short-term loans, as well as examine the government debts, national debts It is also needed to examine investments by corporations, state-owned enterprises, propose measures to the Prime Minister propose of handling or removing projects with inefficient investment, even external investment projects 52 3.3 Concentrating on the development of agriculture and industry, overcoming the consequences of the weather and epidemics Currently, the country's potential growth potential is great, especially when Vietnam has become a member of the WTO, foreign investment and private investment has accelerated and export market has expanded Thus, the development of production is the root solution in order to create multifarious efficiency, which includes increasing supplies to the internal and external markets, controlling inflation, reducing the excess of imports over exports, along with boosting the economic growth, without any side effects To meet this requirement, the Government has charged the Ministers, chairmen of the People‟s Committees of provinces and cities with tasks of directing drastically, timely removing difficulties and obstacles on capital, on markets and on administrative procedures, in order to promote the development of production 3.4 Ensuring the balance of the supply and the demand for goods, boosting export, and reducing the excess of imports over exports Balancing the supply and the demand for goods, especially essential goods for production and people‟s daily life, is the prerequisite condition so as not to cause sudden changes in prices, prevent speculation and hoarding The Prime Minister and the Ministers have worked with industry associations, businesses producing essential commodities, such as food, medicines, fuel, construction materials, fertilizer , and have assigned these units ensuring supplies and keeping prices under control The policy applies flexible exchange rate with appropriate margins, reflecting the supply and demand relationship in the market, in order to help control inflation, without any significant impacts on export and conversion of foreign currency The trade balance is an important macroeconomic indicator If the trade deficit increases, it will threaten the macroeconomic balance Consequently, it is 53 necessary to adopt resolute measures to control this situation on the basis of promoting export To this, the government is taking drastic measures: - SBV ensures sufficient capital to buy foreign currency from businesses that export products; - Immediately removing the drawbacks of export credit in each particular case; - Strongly reforming administrative procedures related to exporting activities to reduce costs for businesses, in order to improve the competitiveness of Vietnam export It is needed to adjust to a balanced relationship between the supply and the demand for essential goods, continue directing and timely removing difficulties and problems in the manufacture and trade to boost the production and services provision; regularly monitor the changes in the internal and external markets to take timely measures to regulate and stabilize the market Active measures can prevent speculation and raising prices The procedure and principles of controlling importing goods, materials and equipment of the investment projects funded by the State budget, government bonds, government-guaranteed capital or capital from state-owned enterprises are created It is also necessary to examine and closely monitor the declaration, the application of special preferential tariff tax rate under the commitments in the free trade agreement, preferential policies on taxation in the non-tariff zone according to the law; reduce tariffs on the production inputs which cannot be domestically produced; increase export tax to items which are not encouraged to export such as natural resources, raw materials SBV ensures sufficient foreign currency to import essential goods that domestic producers have not met the expectation and restrict loans for importing goods that are discouraged in the list issued by the Ministry of Industry and Trade 54 People's Committees of provinces and cities, especially Hanoi City, Ho Chi Minh City, based on the production, local consumption, direct the production, store, circulation , the distribution of goods, especially essential goods such as food, gasoline…; strengthen price management and price stabilization in the locality The economic groups, corporations, state-owned enterprises keep accelerating equitization and restructuring and strict control of production costs in order to enhance business efficiency, ensure the prices of goods and services at a reasonable level 3.5 Thoroughly saving in production and consumption Currently, wastage in production and consumption occurs commonly in offices and units The potential savings in production and consumption are huge Therefore, the government has required state-owned enterprises to cut down the administrative expenditure by 10% The government urged everyone to curb expenses, especially for fuel and energy This solution reduces the demand pressure and trade deficit, as well as increases the social production efficiency The ministries, agencies and local organizations strengthen the inspection and supervision of the implementation of regulations on thrift and combating wastage; implement power-saving programs; concurrently, apply the necessary and appropriate measures to encourage businesses and people to use energy (electricity, gasoline) thriftily, and use high technology, green technology, clean and power-saving technology 3.6 Strengthening the market management and controlling the observance of law in prices It is necessary to prevent the situation of taking great advantage of market volatility for speculation and raising prices, especially of essential commodities for production and consumption, such as petroleum, steel, medicine and food ; prevent the cross-border smuggling, especially the smuggling of petroleum and mineral resources 55 The enterprises of all economic sectors must regularly check the selling prices in the retail network and retail agents of their business The Government has directed State-owned Corporations to be exemplary leaders to meet this requirement and to be responsible for their own operation of retail outlets The Government has also requested industry associations to actively participate in and support policies and measures to stabilize the market and prices 3.7 Expanding the implementation of policies on social security Facing the situation of rising prices which affects people‟s daily life, especially for the poor and workers with low incomes, the government has advocated to extend social security policies The government has decided to increase the minimum wage by 20% for those employees in state-owned companies, armed forces, political organizations The Government also adjusts the minimum wage to increase for Vietnamese labor working for enterprises with foreign investment, foreign agencies, international organizations or foreign individual working in Vietnam As for the employees who receive vocational training (including training by the enterprise), the minimum wage is at least 7% higher than the regional minimum wage In addition, about 1.8 million retirees and beneficiaries of social insurance allowances were raised by 20%; more than 1.5 million people having the contribution have the allowance to rise to 20% compared to the current standard Recently, the Prime Minister promulgated Decision No 289 / QD-TT about some policies to support ethnic minorities, households of social policies, the poor and fishermen The government took rice from the national reserve to grant free of charge to the victims of natural disasters At the same time, they have promoted the implementation of national target programs and other supportive measures for disadvantaged areas and areas affected by natural disasters It is important to create 56 mechanism and examine execution to ensure the state‟s assistant to the right people The entire country has performed tasks to control inflation, stabilize the macroeconomy, and ensure social security in difficult conditions After many years of innovation, the potential of our country has been strengthened; the politics and society are stable Under the leadership of the Party, with the determination of the political system, the consensus and efforts of all sectors and at all levels, it is possible to obtain the target of inflation control, macroeconomic stability, social security insurance 3.8 Sub-conclusion There are many solutions to control inflation and improve the situation: - Even inflation is due to many causes, these always include monetary problem Being aware of this situation, the government plans to control strictly the means of payment and the total credit outstanding In fact, an active, flexible and efficient management of monetary policy tools, particularly interest rates and money supply, can control the inflation - Another measure is to reduce the public investments and recurrent costs, strictly control the investment of state-owned enterprises because cutting down these investments can reduce the demand pressure, as well as the excess of imports over exports, and contribute to improvement of the economy efficiency - Concentrating on the development of agriculture and industry is also needed It is due to the fact that the development of production is the root solution in order to create multifarious efficiency including the control on inflation - To control the inflation, balancing the supply and the demand for goods, especially essential goods for production and people‟s daily life, is the prerequisite condition so as not to cause sudden changes in prices, prevent speculation and hoarding - The government urged everyone to curb expenses, especially for fuel and energy, because wastage in production and consumption occurs in offices and units 57 very commonly This solution reduces the demand pressure and trade deficit, as well as increases the social production efficiency - The government has also advocated to extend social security policies by increasing the minimum wage for both domestic and foreign employees and supporting ethnic minorities, households of social policies and the victims of natural disasters After years of controlling inflation, facing a lot of difficulties, by the suitable policies for our country‟s economy and the sound leadership of the government, Vietnam has recently obtained encouraging results, keeping the inflation rate at a quite reasonable level, which is a useful tool for the economic growth at the present and in the future However, it cannot be ignored that there still exists an implicit threat that can make the inflation situation become worse suddenly 58 PART C: CONCLUSION Recapitulations and concluding remarks When studying about inflation, scientists and the whole society have confirmed that inflation has always been a major and complex topic of concern Once the inflation situation becomes worse, it carries the potential destructive hidden power, disorders the economy and complicates the society We are all aware that the process of controlling inflation is not simple in one or two days Inflation is always a matter relating to monetary system so that it is impossible to eliminate it In another words, it has always existed The question for any country is to implement appropriate measures to ensure high and stable economic growth, along with the inflation at a reasonable level Changes in inflation situation in Vietnam have been very complicated Inflation was raging when Vietnam carried out the reform in the economy and society, after eliminating subsidized system and bureaucracy Inflation has always threatened the economy anytime Therefore, the government must always be careful in every step to ensure the stable development of the economy, which is the foundation of the science, technology and education development, in order to catch up with other countries in the region in particular and countries in the world in general Vietnam has obtained remarkable achievements in inflation control, paving the favourable way for economic development in the future Implication of the study An economy with a good state is an economy with moderate inflation rate, and inflation rate is less than the economic growth rate Thus, to control inflation, stabilize macro-economy, achieve the target of economic growth, social security, accelerate national industrialization and modernization in the coming period, the state should improve policies, regulations and skills to cope with the inflation resulting from the external factors, in order to build a good state of economy from inside Inflation is not entirely bad; it also has a positive side It means that when 59 the economy is developing effectively, technical progress is applied positively and economic structure is renovated quickly and in the right direction, then inflation is an important tool for the economic growth and anti-recession So we need to keep inflation at an acceptable level or inflation is balanced and create good conditions for it to become a driving force of development process Limitation and proposal for further study After studying and researching this subject, I have been better understanding about inflation‟s theory as well as its situation in Vietnam particularly and in the world generally recently However, due to the limited and incomplete knowledge of the economy, there must be many errors and defects in my graduation thesis I would absolutely appreciate your help to make this thesis better 60 REFERENCES „CPI forecast in 2016‟, February 2016, from http://kinhtevadubao.vn/ „Global inflation situation and its impact‟, September 2015, from http://nghiencuuquocte.org/ GSO‟s data and figures of indexes that represent the level of inflation, from http://gso.gov.vn/Default.aspx?tabid=217 „Inflation: An unpredicted variable in 2016‟, April 2016, from http://tapchitaichinh.vn/ „Inflation, explained‟, Vox, July 25, 2014 Retrieved September 13, 2014 „Inflation: Prices on the Rise‟ (March 2012) from the IMF „Inflation, the Fed, and the Big Picture‟, Carmen Reinhart, September 2015, from www.project-syndicate.org References from Monetary Banking‟s study materials „The counter-revolution in monetary theory‟, Milton Friedman, first Wincott memorial lecture, delivered at the Senate House, University of London, 16 September, 1970