Researching on the impact of interbank interest rates on exchange rate in Vietnam

Abstract

Interest rates and exchange rates on the market have a interactive relationship and are influenced by many intertwined factors, especially in the context of international economic integration. This research is designed to investigate the impacts of interbank interest rates on exchange rates in Vietnam, thereby giving some recommendations to the Vietnam State Bank on making interest rate policy and other economic policies which are reasonable to Vietnam’s current economy. To do that, the researcher applies the GARCH (1,1) model to measure the impacts. The researcher comes to the conclusion that the interbank interest rates affect the exchange rates in long-term period.