Vietnamese Dong Devaluation: Securing the Future with a Weaker Currency?
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Case Code: ECON032 Case Length: 15 Pages Period: 2010 Pub Date: 2011 Teaching Note: Not Available |
Price: Rs.400 Organization : - Industry : - Countries : Vietnam Themes: Macro Economic Management, Currency Devaluation |
Abstract Case Intro 1 Excerpts
"Developing countries have often resorted to devaluations to reduce large external imbalances, correct perceived "overvaluations" of the real exchange rate, increase international competitiveness, and promote export growth."
-Carmen M. Reinhart, Department of Economics, University of Maryland, in 1994.
Introduction
Since 2008, Vietnam had been resorting to devaluing its currency, the Dong (VND), in a bid to arrest the growth of interest rates and boost exports and thus push economic growth. The dong reached a three-year high of VND15,815/US$ at the end of March 2008. On June 11 2008, to contain double-digit inflation and improve the worsening balance of payments3 position, the dong was devalued to VND16,461/US$ and was further devalued to VND16,989/US$ on December 25, 2008. On November 25, 2009, the State Bank of Vietnam4 (SBV) undertook its third devaluation since 2008 and devalued the dong by 5% from VND17,034 to VND17,967 per US$5...
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