Impacts of Monetary Policy on Stability of Commercial Banks – Evidence from Vietnam

Duc Trung Nguyen () and Thi Nhu Quynh Nguyen ()

International Journal of Management and Sustainability, 2021, vol. 10, issue 4, 92-103

Abstract: Before 2009, most central banks conducted their monetary policy with the ultimate goals of promoting price stability, economic growth and full employment. However, the 2009 financial crisis demonstrated that these goals are not enough to maintain a stable financial arena. So, aside from those objectives, the objective of financial stability is also of interest to central banks when implementing monetary policy. In this study, the authors explore the influence of monetary policy on the stability of commercial banks in Vietnam – an emerging economy. The study uses the dataset of the Vietnamese commercial banks from 2008 to 2019, applying SGMM estimations and checking their robustness with a Bayesian approach. The results show that, in recent years, the SBV has effectively implemented monetary policy to ensure banks’ stability in Vietnam. In particular, money supply M2 has positively impacted the stability of commercial banks. Also, the results imply that the ratio of loan to total assets, the ratio of cost operating to income operating, as well as CPI, correlate negatively with bank stability. The study did not find any impact of bank size or GDP on bank stability during the research period. Based on these results, the SBV should manage an optimal level of money supply M2 to guarantee efficient economic operations in general and maintain bank stability in particular, and should avoid high inflation.

Keywords: Monetary policy; SGMM; Bayesian approach; Commercial bank; Bank stability; Vietnam (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations:

Downloads: (external link)
https://archive.conscientiabeam.com/index.php/11/article/view/1094/1539 (application/pdf)
https://archive.conscientiabeam.com/index.php/11/article/view/1094/5198 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pkp:ijomas:v:10:y:2021:i:4:p:92-103:id:1094

Access Statistics for this article

More articles in International Journal of Management and Sustainability from Conscientia Beam
Bibliographic data for series maintained by Dim Michael ().