On the Effects of Monetary Policy in Vietnam: Evidence from a Trilemma Analysis

Viet-Ngu Hoang, Duc Khuong Nguyen and Tuan Anh Pham

MPRA Paper from University Library of Munich, Germany

Abstract: During and after the 2008-2009 global financial crisis, the growth cycle of Vietnam’s economy has shifted from an average annual growth rate of 7%-8% to an average annual growth rate of 5%-6% with a high level of macroeconomic instability and uncertainty from 2009 till 2016. Related studies have speculated that the operations of monetary policies during this period were not effective in recovering the economic growth and stabilizing the overall price level and total output level. This paper provides the first empirical examination of this speculation using the Trilemma framework. Our empirical results show that the State Bank of Vietnam has had adopted a set of policies aiming at maintaining exchange rate stability and interest rate independence while easing the restrictions on capital inflows. The combination of these three monetary policy approaches is found to violate the rule of Trilemma. Consequently, exchange rate and interest rate policies became less effective and failed to stabilize the economy in response to the global economic recession.

Keywords: Vietnamese economy; Trilemma; monetary policy; economic recession; macroeconomic conditions. (search for similar items in EconPapers)
JEL-codes: F31 F33 F36 (search for similar items in EconPapers)
Date: 2019-11, Revised 2020-03
New Economics Papers: this item is included in nep-mac, nep-mon, nep-sea and nep-tra
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Related works:
Journal Article: On the effects of monetary policy in Vietnam: Evidence from a Trilemma analysis (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:102521

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