The study investigates the impact of inflation rate on economic growth to find the best-fit model for economic growth in Vietnam. The study applied Vector Autoregressive (VAR), cointegration models, and unit root test for the time-series data from 1996 to 2018 to test the inflation impact on the economic growth in the short and long term. The study showed that the two variables are stationary at lag first difference I(1) with 1%, 5% and 10%; trace test indicates two cointegrating equations at the 0.05 level, the INF does not granger cause GDP, the optimal lag I(1) and the variables are closely related as R2 is 72%. It finds that the VAR model’s results are the basis to perform economic growth; besides, the inflation rate is positively related to economic growth. The results support the monetary policy. This study identifies issues for Government to consider: have a comprehensive solution among macroeconomic policies, monetary policy, fiscal policy and other policies to control and maintain the inflation and stimulate growth; set a priority goal for sustainable economic growth; not pursue economic growth by maintaining the inflation rate in the long term, but take appropriate measures to stabilize the inflation at the best-fitted VAR forecast model.

The study investigates the relationship between the inflation rate and economic growth to find out the optimal inflation threshold for economic growth. Therefore, this study applied an ordinary least square model (OLS) and the ordinal regression model, and collected the time-series data from 1996 to 2017 to test the relationship between inflation and economic growth in the short-term and long-term. The sample fits the model and is statistically significant. The study showed that 96.6% of correlation between inflation rate and economic growth are close and 4.5% of optimal inflation threshold is appropriate for economic growth. It finds that the optimal inflation threshold is base to perform economic growth, besides the inflation rate is positively related to economic growth. The results support the monetary policy appropriately. This study identifies issues for Government to consider: have a comprehensive solution among macroeconomic policies, monetary policy, fiscal policy and other policies to control and maintain the inflation and stimulate growth; have appropriate policies to regulate inflation to stimulate economic growth over the long term; set a priority goal for sustainable economic growth; not pursue economic growth by maintaining the inflation rate in the long term, but take appropriate measures to stabilize the inflation at the optimal inflation threshold.