Tài liệu Hạn chế tình trạng đô la hóa tại việt nam tt tiếng anh

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY ---------oo0oo--------- PHD. STUDENT: NGUYEN THI THU HIEU LIMITING THE DOLLARIZATION STATUS IN VIETNAM SUMMARY OF DOCTORAL DISSERTATION IN ECONOMICS HO CHI MINH CITY – 2019 MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM BANKING UNIVERSITY OF HO CHI MINH CITY ---------oo0oo--------- PHD. STUDENT: NGUYEN THI THU HIEU LIMITING THE DOLLARIZATION STATUS IN VIETNAM SUMMARY OF DOCTORAL DISSERTATION IN ECONOMICS MAJOR: FINANCE - BANKING CODE: 9.34.02.01 SUPERVISOR: PROF. PHD. NGUYEN THANH TUYEN HO CHI MINH CITY – 2019 -1- CHAPTER 1 LITERATURE REVIEW 1.1. THE NECESSITY OF THE STUDY With the process of strong economic integration, the transitional economies have attracted a large amount of foreign currency through different channels. These foreign currencies are important resources in helping countries in transition process to promote economic development. However, these countries have been facing the phenomenon of dollarization in the economy. Dollarization is often seen as an indispensable product, an objective entity linked with the operating mechanism of an open economic system, so the content of this phenomenon itself has shown its positivity. However, when an economy is dollarized, the process of regulating money supply of the central bank is difficult, as well as seriously affects the balance of the foreign exchange market. Besides, when the contents of dollarization are abused by subjective and spontaneous elements of members of society, or when the economic management agencies do not have effective measures to control its negative sides, dollarization will lead to unpredictable consequences for the economy - society. In the same situation like most other developing countries, Vietnam has had a long history of using the US dollar in parallel with the Vietnamese currency since the 1960s. After the reunification of Vietnam in 1975, Vietnam’s economy experienced a long period of difficulties and failures in the price-wage-money policy of the domestic currency, from which the public lost faith in the value of VND, the trend of gold and foreign currencies increases, which made the phenomenon of dollarization become more complicated. Although there have existed a great number of studies on dollarization in the world as well as in Vietnam. However, the reality shows that the dollarization status is still quite complicated, affecting the economic stability and growth in the process of integration. Especially, there are still no effective ways to deal with this phenomenon in the Vietnamese economy. Therefore, the author chooses the -2- topic: “Limiting the dollarization status in Vietnam” as a research topic for her doctoral thesis. 1.2. REVIEW OF RELATED STUDIES In the ability of approaching materials of the author, the researches on dollarization in Vietnam mention the process of dollarization in Vietnam in terms of causes, impacts and solutions in specific periods. However, there are still scientific gaps as follows: (1) Regarding the research objectives, there have existed no studies on the correlation between the dollarization status and macroeconomic indicators such as: inflation, exchange rates, interest rates, foreign exchange reserves, ...; (2) Regarding the scope of the study, there have been no studies on the comprehensive evaluation of impact of dollarization phenomenon on the economy before, during and after Vietnam’s accession to WTO according to the following criteria: deposit dollarization, loan dollarization, cash dollarization, dollarization of valuation and prices; (3) Regarding the research method, there have been no studies examining the correlation between the phenomenon of dollarization and the macroeconomic indicators in short-term as well as long-term. 1.3. OBJECTIVES AND RESEARCH QUESTIONS Objectives: the thesis is conducted to obtain one main aim and three specific objectives. The main aim is: to examine the dollarization status of the Vietnamese economy, to determine the correlation between the dollarization status and the macroeconomic indicators, thereby suggest some policies to limit the dollarization status in Vietnam. Specific objectives are: (1) to analyze the dollarization status, to identify the causes and impacts of dollarization on the economy from 1992-2017; (2) to Identify the correlation between the dollarization status and the macroeconomic indicators such as: economic growth, foreign exchange reserves, exchange rates, inflation, interest rates,...; (3) to propose solutions to limit the dollarization status in the Vietnamese economy. Research questions to achieve the objectives: (1) How does the dollarization phenomenon in Vietnamese happen through stages? What causes this phenomenon? -3- How does it affect Vietnam's economy? What measures have been used by the Government to deal with the dollarization status? (2) Is there a correlation between the dollarization status and the macroeconomic indicators such as inflation, exchange rates, interest rates, foreign exchange reserves, ...? If yes, what is the direction and degree of impact? (3) What are measures to limit dollarization status of the Vietnamese economy in the background of integration? 1.4. THE SUBJECTS AND SCOPE OF THE STUDY - Research subjects: the dollarization status, its causes, the relationship between the dollarization status and the macroeconomic indicators. The dollarization status is evaluated based on criteria: deposit dollarization, loan dollarization, cash dollarization, dollarization of valuation and pricing. Among them, the study focuses on the deposit dollarization and the loan dollarization. The macroeconomic indicators include: inflation, exchange rate, interest rate, GDP growth, foreign exchange reserves and import and export value. - Scope of research: Regarding space, Foreign currency deposits and foreign currency loans on the total deposits and loans of individuals and businesses in the commercial banking system in Vietnam; In terms of time: the study examines the period from 1992 to 2017. 1.5. RESEARCH METHODOLOGY The study uses a systematic approach and dialectical materialism method, with the use of descriptive statistical methods, synthetic analysis method combined with comparative and interpretative methods to explain for the research problems used throughout the thesis. In addition, the thesis uses the method of quantitative regression with the Vector Error Correlation Model (VECM), processed through Eviews 8.0 software to solve the research question 2. -4- 1.6. RESEARCH DIAGRAM Resesarch problems Resesarch objectives Reseach methodology Quantitative method Qualitative method • Current situation of dollarization • Causes of dollarization • Solutions to resolve dollarization implemented by the Government • The relationship between the status of deposit dollarization and monetary indicators • The relationship between the status of loan dollarization, economic growth and export Summaries Findings General conclusions Solutions and Requests 1.7. CONTRIBUTIONS OF THE STUDY Firstly, on the basis of systematizing general theories on dollarization, the thesis evaluates comprehensively on the dollarization status in the Vietnamese economy since its opening until now (from 1992 to 2017). The thesis also identifies the causes of dollarization, analyzes and evaluates successes and limitations of measures to overcome the dollarization status implemented by the Government during the study period. Secondly, in the research period, the dissertation has provided empirical evidence on the relationship between the phenomenon of deposit dollarization and some macro variables under the impact of the deposit rate ceiling policy. Research results show: (1) Foreign exchange reserves and deposit interest rates of domestic currency have a negative impact on the situation of deposit dollarization; (2) Parallel market profits, foreign currency deposit rates, exchange rates and inflation have a -5- positive impact on the deposit dollarization status; (3) The policy of mobilizing twoceiling interest rates with USD deposit rate of 0% brings a good result, helps reduce the deposit dollarization in stable macroeconomic conditions. Thirdly, in the research period, the thesis examines the relationship between the status of loan dollarization and economic growth and exports. Results show that the status of loan dollarization has a negative impact on the economic growth; a positive impact on exports in the short term; and a positive impact on the dollarization status and the differential in costs paid when borrowing VND compared with USD. 1.8. ORGANIZATION THE STUDY The study consists of 5 chapters: Chapter 1: The literature review Chapter 2: Theoretical background of dollarization Chapter 3: The dollarization status in Vietnam in the period from 1992 to 2017 Chapter 4: Empirical evidence of the relationship between dollarization and macroeconomic indicators Chapter 5: Conclusions and solutions to limit dollarization in Vietnam CHAPTER 2 THEORETICAL BACKGROUND OF DOLLARIZATION 2.1. DOLLARIZATION IN ECONOMY 2.1.1. General theories on dollarization and the dollarization status 2.1.1.1. Dollarization ❖ Definition: dollarization is a phenomenon of a currency of any countries in the world appearing in the economy of another country in any forms, regardless the acceptance or disapproval of the Government of that country. In other words, dollarization is the phenomenon of people using money not issued by the Government of that country. ❖ Classification: Based on the legality of foreign currency including official dollarization, unofficial dollarization and semi-official dollarization; Based on the -6- monetary functions including dollarization replacing assets, dollarization replacing payment also known as the currency dollarization, dollarization of listed valuation, financial dollarization; Based on the mechanism of foreign currency occurrence including deposit dollarization, loan dollarization, cash dollarization and dollarization listed evaluation. 2.1.1.2. The dollarization status in economy The phenomenon of dollarization in economy reflects the rates of use of foreign currency to do monetary functions regardless the Government’s acceptance or disapproval. Based on the classification criteria, dollarization is often quantified according to different criteria. Two commonly used criteria (according to IMF): Deposit dollarizations: DDI = FCD TD (FCD: Foreign currency deposits, TD: total deposit) Loan dollarization: LDI = FCL TL (FCL: Foreign currency loans, TL: Total loan) From the calculation results, dollarization will be assessed according to 3 levels: high (> 30%), average (from 10% to below 30%) and low (<10%). 2.1.2. The impact of dollarization on the economy Dollarization has both positive and negative influences. Positive impacts: reduce transaction costs and eliminate exchange rate risks; promote international trade and world economic integration; reduce hyperinflation, help the economy overcome the crisis. Negative impacts: reduce the effectiveness of the management of monetary policy; limit the function of the central bank as the final lender; narrow the export market share; easily lead to the risk of financial crisis; loose the control of the currency, affect the nation’s political prestige; easily cause the instability in macroeconomic and a series of other social issues. -7- 2.1.3. The relationship between dollarization and macroeconomic indicators 2.1.3.1. Theory of currency choice ❖ Gresham Law: “bad money drives out good”. If the foreign currency is a reliable and internationally accepted currency, it will be stored more than the domestic currency. ❖ Theory of asset demand According to Friedman (1956) and Mishkin (2003), to determine the need for an asset, it is necessary to compare the benefits of holding that asset with those of holding other assets. In an economy, if holding domestic currency has less benefit and more risks than holding foreign currency, the demand for foreign currency will be higher. ❖ Equal relations in the international financial market • Equivalence of interest: including 2 types: Covered Interest Parity (CIP) and Uncovered Interest Parity (UIP). CIP has the form as: (1+ r) = F(1 + r*) E or CIP has the approximate form as: r − r* = F − E E UIP has the form as: r − r* = E • International Fisher effect: the combination of Fisher, the law of uncovered interest parity (UIP) and the law of purchasing power parity (PPP): According to Fisher: r = r e + p e According to UIP: E = r − r * (1) (2) According to PPP: E = p e − p*e (3) International Fisher effect: r e = r *e (combine (1), (2) and (3) * e In which: r, r is the nominal interest rate of the local and foreign currency; r , *e r is the expected interest rate of the local and foreign currency; E, F are forward exchange rate, spot exchange rates; ∆E is the expected fluctuation of the exchange e *e rate; p , p is predicted inflation of the domestic and foreign currency. -8- In perfect market conditions, the interest rates of currencies tend to balance with the fluctuation of exchange rates. In fact, investors tend to choose currencies with higher convertibility and lower risks. 2.1.3.2. Correlation between dollarization and macroeconomic indicators ❖ Correlation between deposit dollarization and macroeconomic indicators • Deposit dollarization and inflation Inflation ↑ purchasing power of local currency ↓ Unofficial dollarization Foreign currency demand ↑ Local currency demand ↓ Gresham, Friedman, Miskhin, Fisher Foreign currency price ↑ Local currency price ↓ Foreign demand for domestic goods ↑ Official dollarization → currency exchange Foreign currencies perform currency functions for local currency Inflation ↓ Cost of imported goods ↑ Prices of domestic goods↑ (Inflation↑) Source: The author • Deposit dollarization and exchange rate Deposit dollarization increases when the expected exchange rate rises (∆E>0) because holding foreign currency will be more beneficial than the domestic currency ( r r * + E ) and vice versa. • Deposit dollarizations and interest rates If foreign currency interest rate is higher than that of domestic currency, deposit *e e e e dollarization increases (r >r ). Conversely, deposit dollarization decreases, r > r* . -9- Deposit dollarization is positively related to the foreign currency and negatively related to the domestic currency interest. • Deposit dollarization and exchange rate differential between free market and formal market (parallel market returns) Countries that do not meet the demand for foreign currencies will tend to trade on free markets, leading to higher price of foreign currencies in free market than that in official market, stimulating the motive to hold foreign currencies to speculate. Therefore, the higher the parallel market profit is, the more deposit dollarization increases. ❖ Correlation between loan dollarization and macroeconomic indicators • Loan dollarization and inflation In theory, when high inflation occurs, borrowers will choose the domestic currency because the real interest rate which must be paid is lower. This means loan dollarization will decrease. In reality, when inflation is high, tight monetary policy is applied, nominal interest rate of domestic currency is increased, so borrowers will have more benefit when choosing foreign currency. • Loan dollarization and exchange rates When it is due, foreign currency borrowers have to pay the cost of r*+∆E while domestic currency borrowers only have to pay the cost of r. Therefore, if the exchange rate fluctuates constantly, foreign currency borrowers will face risks and vice versa. The relationship between loan dollarization and exchange rate is a negative relationship. • Loan dollarization and interest rates In theory, countries with weak currencies will have r>r* and there will be a deviation in CIP. Investors will borrow foreign currencies to invest in domestic markets to get benefits. This makes loan dollarization increases. In fact, the blinding regulations in foreign exchange transactions lead to the lost of opportunity to benefit from the differential from foreign currency trading activities. If there exists the phenomenon of r > r*+∆E, loan dollarization will increase. - 10 - • Loan dollarization and deposit dollarization Logically, loan dollarization functions similarly to deposit dollarization because of the profitability of commercial banks. • Loan dollarization and export Borrowers will have risks when the loan currency and the repayment currency are different, while the weak currencies are less accepted in international payments. Borrowers often choose foreign currencies to foster import and export activities. Loan dollarization has a positive relationship with export activities of enterprises. 2.2. LIMITING THE DOLLARIZATION STATUS IN ECONOMY 2.2.1. Concept To limit dollarization, a Government has to combine macroeconomic policies and micro-measures (which can be encouraged or required) to enhance the use of domestic currency compared with foreign currencies. 2.2.2. Policies and measures to limit dollarization Studies have suggested such policies and measures to limit dollarization successfully as: (i) Stabilizing macroeconomics, (ii) Using market instruments, (iii) Using mandatory administrative tools. Policies to limit dollarized economy have two sides. They can bring successfulness or failures. 2.3. EXPERIENCE TO SOLVE DOLLARIZATION OF A NUMBER OF COUNTRIES IN THE WORLD AND LESSONS FOR VIETNAM 2.3.1. The reality of dollarization in some countries in the world In this section, the thesis analyzes the cause of dollarization, the economic situation, the benefits and risks after deciding on the official dollarization. For semiformal and informal dollarization countries, the thesis further analyzes the policies to restrict dollarization forced by the Government. - Official dollarization countries: Ecuador and El Salvador - Semi-official dollarization countries: Cambodia and Laos - 11 - - The countries succeeded in solving unofficial dollarization: China, Chile, Israel, some countries in Latin America, some countries in Southeast Asia. 2.3.2. Experience to limit dollarization in the Vietnamese economy Dollarization does not completely cause bad effects on the economic development of a country. Sometimes, dollarization is the driving force to attract investment in economic development. Therefore, the measures to restrict dollarization in economy need consider following issues: the restriction on dollarization does not mean eliminating it completely, official dollarization is not a good choice when a crisis occurs, to restrict dollarization, it is necessary to combine measures administrativewith market economy instruments, consistent with the unique circulation of the domestic currency in the economy and reinforce belief in the domestic currency with a stable macro economy. CONCLUSION CHAPTER 2 In chapter 2, the thesis presents the general theories on dollarization and the dollarization status, evaluates the impact of dollarization on the economy, analyzing the relationship between dollarization and macroeconomic indicators based on the theories of money. In the next section, the thesis presents the theoretical framework for restricting dollarization, drawing lessons from the countries facing with dollarization in the economy. CHAPTER 3 THE DOLLARIZATION STATUS IN VIET NAM IN THE PERIOD FROM 1992 TO 2017 3.1. THE IMPACTS OF ECONOMIC CHARACTERISTICS ON DOLLARIZATION IN VIETNAM IN THE PERIOD FROM 1992 TO 2017 3.1.1. Economic growth In general, the trend of the GDP and the dollarization status is inversely related. When GDP is stable and rises, dollarization decreases. Conversely, when GDP falls, the dollarization tends to increase. - 12 - Figure 3.1: GDP growth and dollarization status in the period from 1992 to 2017 % 12 10 % 50 40 8 6 20 4 FCD/TD (right column) 10 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 1992 2 0 GDP (left column) 30 0 Source: IMF 3.1.2. Balance of trade The trade balance was improved, Vietnam moved from a trade deficit for a very long time to a trade surplus since 2012. Figure 3.2: Balance of trade and dollarization status in the period from 1992 to 2017 % 10000 35 5000 25 0 -5000 15 Balance of trade -10000 FCD/TD (% -15000 - left column) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 5 million USD 45 Source: IMF, World Economic Outlook Database, April 2018 3.1.3. Foreign capital Figure 3.3: Foreign capital inflows into Vietnam in the period from 1992 to 2017 35 Remittances ODA FPI FDI (Net) 25 billion USD 15 5 -5 Source: General Statistics Office, World Bank, IMF, SBV - 13 - Vietnam’s financial integration process has attracted more and more external capital such as FDI, FPI, ODA and remittances, thereby putting pressure on exchange rates, inflation, interest rates or dollarization status is more and more increasing. 3.1.4. Foreign exchange reserves By the end of 2017, foreign exchange reserves reached 48.69 billion USD. Figure 3.4 shows that currency reserves and dollarization tend to be opposite. Figure 3.4: Foreign exchange reserves and dollarization in the period from 1992 to 2017 55000 million USD Foreign exchange reserves % 50 35000 40 30 15000 20 FCD/TD (right column) 10 -5000 0 Source: International Financial Statistics, IMF 3.2. CURRENT SITUATION OF DOLLARIZATION IN VIETNAM’S ECONOMY In the past, the scale of Vietnam’s economy was very small. From 1985 to 1986, VND weakened because of the failure of price-salary-money policy, inflation was up to 3 numbers, gold price increases constantly, residents used gold and foreign currencies to store, speculated price and used it as a means of payment. However, dollarization was not taken into account because the economy’s openness is still very small. Since Decree 161-HDBT was issued in 1988, gold and foreign currencies were used in a very chaotic context. Since 1992, Vietnam has officially opened its economy, expanded into the world economy and faced with dollarized economy. 3.2.1. Deposit dollarization The phenomenon of deposit dollarization increases or decreases according to the stability of the macro economy. In relatively stable macroeconomic periods, - 14 - deposit dollarization decreased (1992 - 1996; 2002 - 2007); When the economy was in recession or effected from the world crisis, deposit dollarization increases (1997-2001; 2008-2011; 2013). Overall, deposit dollarization tends to decrease sharply. Figure 3.5: Deposit dollarization in the period from 1992 to 2017 % billion Dong 50 40 7500000 6000000 30 4500000 20 3000000 10 1500000 0 Total deposit (right) Foreign currency deposit (right) Deposit dollarizaton (leef) 0 Source: Viet Nam Statistical Appendix, IMF 3.2.2. Loan dollarization Figure 3.7: Loan dollarization in the period from 1992 to 2017 45 6000 40 35 5000 30 4000 25 3000 20 15 2000 10 Total loan (left column) Loan in VND (left column) Loan in foreign currency (left column) Loan dollarization (right column) 2017 2015 2016 2013 2014 2011 2012 2008 2009 2010 2007 2006 2004 2005 2002 2003 1999 2000 2001 1997 1998 0 1995 1996 5 0 1993 1994 1000 1992 % Thousa nd billion Dong 7000 Source: IMF Loan dollarization tends to increase in the period of stable macroeconomic, especially exchange rates. Typically, in the periods from 1992 to 1996, from 2002 to 2006, from 2009 to 2010, the exchange rate was stable, loan dollarization increased. In contrast, in the periods from 1997 to 2001, from 2007 to 2008, the exchange rate fluctuated constantly, loan dollarization decreased. From 2012 to now, although the - 15 - exchange rate has been relatively stable, the loan dollarization has dropped sharply to 7.9% (in 2017) because the SBV tightened the demand for foreign currency loans. 3.2.3. Cash dollarization The thesis estimates the amount of foreign currency in circulation by two methods: basing on the amount of remittances and the change of foreign currency deposits and basing on statistical errors of the national payment balance. The result is estimated at about $ 76 billion in cash in circulation in the economy. 3.2.4. Listing and pricing dollarization Business activities of electronic goods, motorbikes, real estate brokerage centers, etc. are all priced and paid in USD or gold. This phenomenon, then, spreads to such services that food, tourism, to websites selling electronic products, and to economic contracts, etc. Since the Ordinance on Foreign Exchange No. 06/2013 was issued, the phenomenon of listing and pricing dollarization has been greatly reduced. 3.3. CAUSES OF DOLLARIZATION IN VIETNAM By the end of 2017, Vietnam was no longer among countries with high rate of dollarization. However, this phenomenon in Vietnam has been complicated, and fluctuated constantly, causing complexity and strong impacts on exchange rates and on the foreign exchange market. The basic causes of dollarization in Vietnam can be mentioned such as: inflation rate was high and occurred complicatedly, USD/VND exchange rate tended to increase constantly, benefits when sending and borrowing VND is not high, the policy of foreign exchange management and the existence of foreign exchange market was unofficial, the exchange rate between the official market and the free market was different, foreign currency was regarded as a normal means of payment and could be stored and more and more foreign currencies occur in Vietnam. 3.4. MEASURES TO SOLVE DOLLARIZATION USED BY THE GOVERNMENT The government began to take measures to deal with the dollarization status since Decision 98/2007/QD-TTg was issued, specifically: - 16 - 3.4.1. Measures directly affecting the condition of dollarization 3.4.1.1. For deposit dollarization According to the Circular 09/2011 on April 9, 2011, interest rate ceiling of USD was officially applied for both organizations (1%) and individuals (3%), then, decreased gradually and currently interest rate ceiling of USD is 0% for both organizations and individuals, leading to the fall of deposit dollarization to 9.4% at the end of 2017. 3.4.1.2. For loan dollarization Applying three measures synchronously including (i) Narrowing demand and gradually eliminating the demand for short-term foreign currency loans, only considering the demand for loans to serve export activities, extending short-term foreign currency loans after periods. (ii) Adjusting to reduce gradually the ceiling of VND lending interest rate: from May 2012 to now, the ceiling of VND lending interest rate has been adjusted to reduce gradually to encourage enterprises to borrow in domestic currency (6.5%/year at the end of 2017). (iii) Increasing and maintaining the necessary reserve ratio for high foreign currency deposits: from September 1, 2011 to now, required reserve ratio of foreign currency deposit is greatly different from that of VND, with 6-8% compared with 1-3%. 3.4.1.3. For the status of cash dollarization and pricing and listing dollarization The Foreign Exchange Ordinance 2013 adjusting and adding a number of articles of the Foreign Exchange Ordinance 2005 and Decree 70/2014/ND-CP helps limit the use of foreign currency cash, valuate and list prices. 3.4.2. Measures indirectly affecting the condition of dollarization 3.4.2.1. Reducing the foreign exchange position of credit institutions Issuing Circular No. 07/2012/TT-NHNN, regulating foreign currency status of credit institutions makes foreign bank branches decreased from ± 30% to ± 20% of equity capital (or ± 5 million USD for foreign bank branches). - 17 - 3.4.2.2. Stabilizing the exchange rate by the intervention mechanism on the foreign exchange market and announcing the central exchange rate closely following the foreign exchange market Since the beginning of 2016, the exchange rate instrument used by the SBV has been a central exchange rate rather than average rate on the Inter-bank foreign currency market. In addition, the SBV have also used trade foreign currencies with commercial banks on the inter-bank foreign currency market to intervene in the market exchange rate. 3.4.2.3. Developing a mechanism to manage foreign exchange reserves accordingly with the integration trend Decree No. 50/2014/ND-CP was issued to gather foreign currencies into the SBV, to take initiative in operating monetary policy and investments, to take measures to stabilize the exchange rate, and to strenthen the belief in VND. 3.4.2.4. Implementing measures to limit goldenization, stabilize the domestic gold market Building and applying measures to limit goldenization following three steps: (i) building a strict legal framework to control the gold market; (ii) ending activities of mobilizing and lending in the form of gold of credit institutions; (iii) transferring completely the relationship of mobilizing - lending capital in the form of gold to buying - selling relationship. 3.4.3. Successes and limitations of measures to solve dollarization of the Government The measures have the following successes and limitations: Successes: (i) The situation of holding foreign currencies on accounts decreases sharply; (ii) The situation of loan dollarization falls sharply but the balance of trade remains surplus; (iii) The transactions, payments, listing prices in foreign currencies are minimized; (iv) The belief in VND is gradually restored. Limitations: (i) The law on foreign currencies has not been known extensively; (ii) VND is not attractive enough to eliminate the expectation of gaining profit from - 18 - holding foreign currencies; (iii) Unofficial currencies still exist and become more and more complicated; (iv) the loan-borrowing relationship of foreign currencies is not changed into buying - selling relationship of foreign currencies drastically. CONCLUSIONS OF CHAPTER 3 The thesis presents a number of economic characteristics that impact on dollarization status such as economic growth, trade balance, foreign capital inflows and foreign exchange reserves. Then, the thesis analyzes the current situation, the causes of the dollarization and solutions implemented by the Government, thereby draws successes and limitations. CHAPTER 4 EXPERIMENTAL EVIDENCE OF RELATIONS BETWEEN DOLLARIZATION STATUS AND MACROECONOMIC TARGETS 4.1. RESEARCH MODELS 4.1.1. Reasons for choosing VECM model The thesis selected Vector Error Correlation Model (VECM) for the following reasons: (1) all variables are macroeconomic indicators with time data series often correlated. (2) a great number of studies in the world use the VECM model, (3) the VAR/VECM model does not distinguish independent or dependent variables. 4.1.2. Theory of vector error correction model VECM The VECM model proposed by Johansen and Juselius (1990) and Johansen (1995) is only used in case the data series in the research model must ensure that there is no stationary in the original data I(0) and stationary at the first order difference I(1) and contains least one cointegration relationships. VECM model has the form: Yt = 4.2. EXPERIMENTAL 0+ EVIDENCE 1 X t − ut −1 + t OF RELATIONS BETWEEN DOLLARIZATION STATUS AND MACROECONOMIC TARGETS 4.2.1. The relationship between the deposit dollarization and currency variables under the impact of the deposit rate ceiling policy