A Financial Conditions Index for Vietnam
Journal of Development and Integration, Vol. 21 No. 31 (2015)
Posted: 10 Mar 2021
Date Written: March 1, 2015
This study aims to construct a financial conditions index (FCI) characterizing Vietnam’s financial environment, which captures channels of monetary policy transmission and real economic activity in Vietnam. The indicator is estimated via the factor analysis approach using four financial variables including growth of stock market, appreciation of the real effective exchange rate, spread of lending rates over policy rates, and growth of bank credit to private sector. In-sample and out-of-sample tests demonstrate the forecasting efficiency of the FCI for the real GDP growth in Vietnam.
Keywords: financial conditions index, factor analysis, economic growth
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