Effects of Depreciation and Appreciation of the Vietnamese Dong on Aggregate Output

Abstract

Applying an extended IS-MP-AS model (Romer, 2000, 2006), this paper finds that real appreciation of the Vietnamese dong raised aggregate output during 2000-2012 whereas real depreciation of the Vietnamese dong increased aggregate output during 2013-2017. In addition, aggregate output is positively affected by the government debt-to-GDP ratio, the real stock price, and the real oil price and negatively influenced by the world real interest rate and the expected inflation rate. Therefore, real depreciation may affect aggregate output positively or negatively depending upon the stage of economic development.