VAR Analysis of the Monetary Transmission Mechanism in Vietnam

14 Pages Posted: 27 Aug 2008 Last revised: 15 Oct 2009

See all articles by Le Viet Hung

Le Viet Hung

State Bank of Vietnam

Wade D. Pfau

The American College for Financial Services; Retirement Researcher

Date Written: February 1, 2008

Abstract

Understanding the monetary transmission mechanism is crucial to central bankers. We analyze the monetary transmission mechanism in Vietnam, using the vector autoregression approach (VAR) and focusing on the reduced-form relationships between money, real output, price level, real interest rate, real exchange rate and credit. We find consistent evidence that monetary policy can affect real output. Surprisingly, the connection between money and inflation is less clear in the Vietnam case. As for the transmission mechanism, the credit and exchange rate channels are more important than the interest rate channel.

Keywords: Monetary policy, transmission mechanism, vector autoregression, Vietnam

JEL Classification: E52, E58, C32

Suggested Citation

Le, Hung Viet and Pfau, Wade D., VAR Analysis of the Monetary Transmission Mechanism in Vietnam (February 1, 2008). Applied Econometrics and International Development. Vol. 9, No. 1, pp. 165-179, January – June 2009, Available at SSRN: https://ssrn.com/abstract=1257854

Hung Viet Le

State Bank of Vietnam ( email )

49 Ly Thai To
Hanoi, 10000
Vietnam

HOME PAGE: http://www.sbv.gov.vn

Wade D. Pfau (Contact Author)

The American College for Financial Services ( email )

630 Allendale Rd
King of Prussia, PA 19406
United States

HOME PAGE: http://www.retirementresearcher.com

Retirement Researcher ( email )

1900 Gallows Rd, Suite 350
Vienna, VA 22182
United States

HOME PAGE: http://www.retirementresearcher.com

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