Abstract
This research constructs a financial condition index (FCI) for Vietnam to explore the macro-financial linkages in the country. This index is constructed by applying the principal components analysis (PCA) method. The FCI is constructed using monthly data from 2000 to 2020 and is based on a set of financial variables, including variables that define the state of international financial markets, asset prices, interest rate spreads, stock market, bond market, and monetary aggregates. We found that FCI could predict the fluctuations of the industrial index and inflation rate from 1 to 3 months in Vietnam. This result plays an important role in helping policymakers and investors in the market to make relevant decisions in the management and investment in the financial market.
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