CHAPTER 4: CASE STUDY RESULTS

This chapter analyses the results of the case study of the relationship between inflation and economic growth in Vietnam, using the method described in the chapter 3 Research Methodology. This chapter concludes table and figure to present the correlation effects between the two factors inflation and economic growth and gives the results forecast in the future with a view to achieving two individual research objectives discussed in the previous chapter.

Figure 14: Inflation and economic growth rate (1995- 2010)

25 20 15 10 5 0 1994 -5 I GDP

1996

1998

2000

2002

2004

2006

2008

2010

2012

Figure 14 was drawn basing on the data in the table 3 in the chapter 2. The graph shows the inflation and economic growth rate of Vietnam from 1995 to 2010. From this graph, it is easy to see that both inflation and economic growth were fluctuated. However, growth rate looks stable than inflation rate, it changed up and down very little. Inflation volatility is very clear, especially period from 1998 to 2000 and 2006 to 2009. In phases, from 1995 to 2007, inflation rate was only in one digit, the average inflation rate is 6.2 percent (even the period 1999 - 2000 occurred deflation); economic growth rate in this period was high growth and stable, the average is 8.2 percent. In 2007, Vietnam became an official member of

WTO, inflation rate increased rapidly to 2 digits, economic growth rate remained high. In 2008, Interest rate was running at record levels, highest since 1995, but the economic growth rate reduced. Due to global financial crisis in 2009, both inflation rate and economic growth rate decreased, inflation was down at 1 digit. In 2010, economy began to recover, the growth rate increased, inflation has also increased again at 2 digits. An overview as seen from the figure, inflation and economic growth rates has positive relationship, but negative correlation if inflation rate is high (in 1998: inflation rate was up to 9.2 percent, economic growth rate was down to 5.8 percent and in 2008: inflation was up to 19.9 percent and economic growth down to 6.2 percent).

Table 4: Summary statistics of variables (1995- 2010)

Mean Growth rate Inflation rate 7.3063 7.0375

Median 7.2 6.55

Maximum Minimum 9.5 19.9 4.8 -0.6

Std. Dev. 1.36062 5.49762

Skewness Kurtosis -0.16083 0.598436 2.20390 9 2.93468 4

Observation 16 16

To clearly, table 4 provides some summary statistic of the variables used in this paper. Vietnams average inflation rate is 7.0375 percent from 1995 to 2010, whereas in the same period Vietnam had maximum and minimum inflation rates of 19.9 percent and -0.6 percent. Vietnams average economic growth rate during the same period was around 7.3063 percent, ranging from a maximum of 9.5 percent to 4.8 percent. Standard deviation of economic growth is low so the stability of the data large, fluctuating around an average value small or the variance of growth rate around the average value low. In contrast, standard deviation of inflation is high, the stability of the data small, fluctuating around an average value high. The correlation coefficient between inflation rate and economic growth rate is 0.168; it

demonstrates that inflation and economic growth have positive correlation in long run but not strong. As introduced in the previous chapter the relationship would be represented by Regression Algorithm method of the Multi Regression Model. Detailed steps of the regression model analysis via Clementine software are presented in Appendix 1. In this chapter gives the final analysis. Result of Regression Algorithm method of the Multi Regression Model is: G = I*0.04161+7.013 It implies that in long run, changing of inflation is faster than economic growth. Economic growth has affect to inflation more than the opposite effect of inflation on economic growth.

1) ong dua ra ket luan G= 11.72, I= 4.82, no nguoc doi lam, doi vi tri 2 so nay cho nhau thay con tam dc, nhin vo cai bang thong ke a, co bao gio G vuot qua 10% dau ma gio toi 11% du zay, them nua lam phat gio cao ngat nguong lun nam nay nguoi ta du doan lam phat ko duoi 17% m o day du doan co 4.28% a Ngoc Ha Chu: 2) figure 2-11 voi 2-12 co y nghia ji zay, jai thix cho chau hiu voi Ngoc Ha Chu: 3) ong ghi Fig2-10: Mean and Std of Time Series Model, tuong tu figure1-10 cung zay, chu std o day la standard deviation hay standard error zay