The article contructs a Financial condition index (FCI) for Vietnam in the period 2000-2020. This index provides a measure of financial condition by combining several financial variables that affect economic activities. Variables in the FCI are grouped into three categories: interest rates, asset prices, and external variables. Weights of components are calculated using the VAR method. The results show that the fluctuations of FCI are similar to the financial conditions in tightening or loosening periods in Viet Nam. The Granger causality test also evaluates that the FCI is significant in predicting real growth and inflation changes. It confirms the role of the FCI as a policy tool.

Keywords: financial conditions index, VAR, short-term forecasting