| This dissertation analyzes monetary and exchange rate policies in Vietnam, paying special attention to the role of gold. Gold has been highly valued as a store of wealth and money substitute in Vietnam, so that developments in the gold market are potentially relevant for monetary and exchange-rate policy. After defining the issues and reviewing existing research, we estimate a dynamic panel-data model of demand for gold using data from more than 20 countries for the 1992-2003 period. Demand for gold is found to be highly persistent and driven by price, exchange rate volatility and banking system depth, while income, wealth and interest, rates do not have significant effects. These findings suggest that the central bank of Vietnam (SBV) is unlikely to be able to control public demand for gold via changes in interest rates and that, in a high-demand country like Vietnam, public interest in gold is likely to wane only slowly due to its historical role.;Next, it is shown that Vietnamese macro and financial data exhibit significant seasonal patterns that have not been accounted for in previous analyses, potentially leading to misleading inferences. Adjusting the Vietnamese data is not straightforward because the timing of the major Tet holiday moves from year to year. Thus, we use the two main state-of-the-art methods, X12-ARIMA and TRAMO-SEATS, to analyze and adjust the data, finding the latter method to be preferred.;Finally, the adjusted data are used to characterize the policy rules used by the SBV in the post-1992 period. Rather than following a Taylor-type interest-rate rule, the SBV appears to have followed a McCallum rule, adjusting monetary growth in response to the price level, the exchange rate, and the difference between the world price of gold and the price of gold in Vietnam at the official exchange rate. When this policy-rule is incorporated into a structural vector-autoregression (SVAR), shocks to the gold-price gap are also found to be valuable for explaining changes in the domestic price level and exchange rate. Thus, given Vietnam's unique institutional, cultural and historical circumstances, the gold price gap has been a valuable indicator for the successful implementation of monetary and exchange rate policies. |
