tailieunhanh - Monetary transmission through interest rate channel in Vietnam before and after the crisis

The paper employs the VAR model to examine the impact of monetary policy on the economy through interest rate channel (IRC) and levels of transmission before and after the 2008 crisis. | JED October 2014| 51 Monetary Transmission through Interest Rate Channel in Vietnam Before and After the Crisis TRẦM THỊ XUÂN HƯƠNG University of Economics HCMC – txhuong@ VÕ XUÂN VINH University of Economics HCMC – vxvinh@ NGUYỄN PHÚC CẢNH University of Economics HCMC – ARTICLE INFO ABSTRACT Article history: Received: Feb. 28, 2014 Received in revised form Apr. 17, 2014 Accepted: Sep. 30, 2014 The paper employs the VAR model to examine the impact of monetary policy on the economy through interest rate channel (IRC) and levels of transmission before and after the 2008 crisis. The results indicate that in the period before the financial crisis, IRC exists in accordance with macroeconomic theory; however, the crisis period, in which increases in SBV monetary policy rates lead to increased inflation, has proved the existence of the cost channel of monetary transmission in Vietnam. Keywords: monetary policy, monetary policy rates, market rate, transmission 52 | Trầm Thị Xuân Hương, Võ Xuân Vinh & Nguyễn Phúc Cảnh | 51 - 75 1. INTRODUCTION Significance of the Study: Monetary policy plays a crucial role in the economy. It affects macroeconomic variables through transmission channels, among which interest rate channel (IRC) is considered an important and traditional one for monetary policy. A study of monetary transmission through IRC as well as changes in the transmission process resulted from economic crisis could allow the SBV to make timely adjustments to its operating mechanisms in accordance with the reality. In addition, the study contributes more empirical evidence to theoretical foundations on monetary transmission in such a small and open economy as Vietnam. Subject Matter: The study focuses on monetary policy and particularly IRC in monetary transmission in Vietnam between 2000 and July 2013. Furthermore, it clarifies the impact of the 2008 financial .