In this paper we study the relationship between oil prices and macroeconomic performance by investigating the impact of oil price shocks on key macroeconomic variables of Vietnam over the 2001–2012 period. | ! ! 142!! Nguyen Thi Lien Hoa et. al. / Journal of Economic Development. 22(4), 142-159 ! The Impact of Oil Prices on the Economy of Vietnam NGUYEN THI LIEN HOA University of Economics HCMC – hoatcdn@ TRAN THU GIANG University of Economics HCMC – NGUYEN LE NGAN TRANG University of Economics HCMC – trangnln@ ARTICLE INFO ABSTRACT Article history: In this paper we study the relationship between oil prices and macroeconomic performance by investigating the impact of oil price shocks on key macroeconomic variables of Vietnam over the 2001–2012 period. In order to test the relationship between oil prices and the value of industrial production, we use cointegration method to consider the long-term relationship and Error Correction Model (ECM) to ponder the short-term one. The test results show that the price of oil and the value of industrial production in Vietnam are positively correlated in the long term, whereas in the short term the volatility of oil prices in the last two months will negatively affect the fluctuation in the value of the current industrial production. Received: Jan. 15 2015 Received in revised form: Jul. 24 2015 Accepted: Sep. 15 2015 Keywords: Oil prices, cointegration, error correction model. ! ! Nguyen Thi Lien Hoa et. al. / Journal of Economic Development. 22(4), 142-159 !143! ! 1.! Introduction Today, the world economy depends mainly on the oil energy, and consumption of oil has increased constantly; therefore, crude oil plays a leading role as a key energy source for the world. Oil prices also have a huge impact on the development of the global economy because most industries are directly or indirectly dependent on this .
