Exercises on central bank intervention.

1. Inflation rate in the U.S is forecasted to be lower than Vietnam’s one. How does it affect
exchange rates between VND and USD on the foreign exchange (FX)? The central bank
of Vietnam (SBV) would like to maintain the previous rate. What actions they will do?
2. Vietnam has been more and more attractive to foreign customers. (supply tăng). The
number of foreign customers choosing Vietnam for holidays is forecasted to increase.
How does it affect exchange rates between VND and USD on the foreign exchange (FX)?
The central bank of Vietnam (SBV) would like to maintain the previous rate. What
actions they will do?
3. An economic growth rate of the U.S is expected to be greater than Vietnam. How does it
affect exchange rates between VND and USD on the foreign exchange (FX)? The central
bank of Vietnam (SBV) would like to maintain the previous rate. What actions they will
do?
4. Vietnamese government is planning to increase the interest rate so how does it affect
exchange rates between VND and USD on the foreign exchange (FX)? The central bank
of Vietnam (SBV) would like to maintain the previous rate. What actions they will do?
5. Vietnamese government started allowing for foreign investors owning houses in Vietnam
so how does it affect exchange rates between VND and USD on the foreign exchange
(FX)? The central bank of Vietnam (SBV) would like to maintain the previous rate. What
actions they will do?
6. U.S. government will increase tuition fee for international students so how does it affect
exchange rates between VND and USD on the foreign exchange (FX)? The central bank
of Vietnam (SBV) would like to maintain the previous rate. What actions they will do?

Solution

3, Economic growth rate of US>VN

 Demand curve shift to the right (D1)

 Sully curve shift to the left (S1)

>> E1>E2

>> US has been appreciated

To maintain at E0, SVB will sell USD on the

FX (ban usd de tac dong vao ti gia)

 USD reserve
 VND in circulation
 Supply curve shift to the right (S2)
  To avoid an inflation effect CBV will use OMO purchases (mua government bond de tac
dong vao cung tien vnd)
- Central bank will buy bonds from the public
- Central bank will pay VND to the public

4,

A, Vietnam tang lai suat anh huong den ti gia ntn

When VN increase interest rate

 The demand curve shift to the left

 The supply curve shift to the right

E0>E1

VND has been appreciated

B, Muon quay ve ti gia E0 thi phai mua do vao,

Lam cho dong do khan hiem

To maintain the exchange rate at E0

 SBV will buy USD on FX -> shift to the right

 USD reverse
 VND circulation

C, To avoid inflation,

- central bank will sell bonds to the public

- central bank will collect VND from the public

5,
Biểu đồ về tỉ giá đô tại VN

Demand do nhu cầu tiêu dùng đồng USD của người việt: vnese local demand USD

Supply curve là đồng đô đổ vào VN, xuất khẩu

6,