Vietnam: Selected Issues

IMF Staff Country Reports, September 27, 2024

Source details

The paper overviews the different tools employed by the State Bank of Vietnam (SBV) and empirically analyzes the monetary policy transmission mechanism, comparing the effects from different SBV rate shocks.
The results indicate that the monetary policy’s interest rate channel affects main financial variables, but there are other factors in the transmission that curtail its effectiveness.
Transmission to inflation or industrial production is generally weak, with only the combined repo/SBV bill rates generating a statistically significant effect.
These findings stress the importance of modernizing SBV’s monetary policy framework to strengthen its transmission mechanism and better achieve its goals.

Modernize the SBV’s monetary policy framework to strengthen transmission and better achieve objectives.
Adopt a clear communication strategy that is easy to understand.
Move toward having one main policy rate employed to achieve one main objective, and conduct open market operations to make the policy rate effective throughout the economy.
Achieving the above would supply the SBV with a stronger monetary policy framework and greater ability to weather future shocks.

Subjects: Central bank policy rate, Currency markets, Financial institutions, Financial markets, Financial services, Inflation, Prices, Securities markets, Sovereign bonds
Keywords: Central bank policy rate, Currency markets, Global, government bond market, Inflation, market size, Policy trade-off, Securities markets, Southeast Asia, sovereign bond market, Sovereign bonds, Vietnam's government bond bond market

Vietnam: Selected Issues; IMF Country Report No. 24/307; July 31, 2024
- Vietnam: Selected Issues; IMF Country Report No. 24/307; July 31, 2024 (Markdown version)
- Vietnam: Selected Issues; IMF Country Report No. 24/307; July 31, 2024 (PDF)