The Impact of Petroleum Retail Price Shocks on Inflation in Vietnam

This paper attempts to measure the impact of petroleum price changes on inflation in Vietnam over the period 2004-2013. It uses Autoregressive Distributed Lags model to estimate the relationship between petroleum prices and Consumer Price Index of different commodity groups. Petroleum price is affected by the world prices, and it is exogenous to a small economy as Vietnam. The analysis result shows that when the price changes, it affects significantly to the fluctuations of CPI immediately and on several next months. In all kinds of CPI, the total CPI, food CPI, construction CPI and transportation CPI suffer the impact the most. Using results of Autoregressive Distributed Lags models for the short-run effects, we compute the long-run effects between Petroleum prices and CPIs. The result reveals that there are some long-run relationships between the petroleum price change and several CPI kinds, in which the largest impacts in long-run are of the food CPI and transportation CPI