MINISTRY OF EDUCATION AND TRAINING

STATE BANK OF VIET NAM

BANKING UNIVERSITY HO CHI MINH CITY

NGUYEN HOANG CHUNG

ANALYZING THE RESPONSE OF MACRO VARIABLES BEFORE MONETARY
POLICY SHOCKS THROUGH A NEW KEYNES MODEL TO IMPROVE THE
QUALITY OF VIET NAM’S MACRO ECONOMIC FORECAST

THESIS SUMMARY
Major: Finance - Banking
Code: 9 34 02 01

HO CHI MINH CITY - 2019


MINISTRY OF EDUCATION AND TRAINING

STATE BANK OF VIET NAM

BANKING UNIVERSITY HO CHI MINH CITY

NGUYEN HOANG CHUNG

ANALYZING THE RESPONSE OF MACRO VARIABLES BEFORE MONETARY
POLICY SHOCKS THROUGH A NEW KEYNES MODEL TO IMPROVE THE
QUALITY OF VIET NAM’S MACRO ECONOMIC FORECAST


address

ISSN

Springer
2019

1860-949X

Rational Expectations Approach.
Forecasting model for Vietnam's small and

EconVN Paper 2019

ISSN

2 opened economy. Methodology approach:

2017
1859 - 1124

BVAR-DSGE.
The impact of monetary policy and macro

ISSN

3 prudential policy on financial stability in Viet

2018
1859 - 3682


Factors affecting the capital structure of listed

The

policy

Banking Technology
Review

Banking University
HCMC Conference

485-6

5 forecasting: Viet Nam’s macroeconomy 2019

7

Development

ISBN

Viet Nam’s macroeconomy – Analysis and

6

Journal of Economic

and


Banking University

2018

Economics Technology


TABLE OF CONTENTS

CHAPTER 1: INTRODUTION ............................................................................................................ 1
1.1. The necessity of the study ..........................................................................................................1
1.2. Setting research issues ................................................................................................................1
1.3. Objectives of the study ................................................................................................................2
1.3.1. General objectives..................................................................................................................2
1.3.2. Detail objectives .....................................................................................................................2
1.4. The study’s questions ..................................................................................................................2
1.5. Objectives and scope of the study ..............................................................................................2
1.5.1. The study’s objectives ............................................................................................................2
1.5.1.1. The factors of monetary policy and macroprudential policy affect credit growth ..........2
1.5.1.2. Macroeconomic variables of the New Keynes model .....................................................3
1.5.2. The scope of this study ..........................................................................................................3
1.5.2.1. Factors affect credit growth .............................................................................................3
1.5.2.2. Factors affect a small opened economy ..........................................................................3
1.6. Methodology Research ................................................................................................................4
1.6.1. The method of estimating variables affects credit growth ...................................................4
1.6.2. The method of estimating macro variables of the SVAR new Keynes model ......................4
1.6.3. The method of estimating macro variables of the DSGE new Keynes model .....................4
1.7. The scientific and practical significance of the thesis ..............................................................4
1.8. Research gap ................................................................................................................................4

2.2.2.3. Uncovered Interest Parity (UIP) ....................................................................................10
2.2.2.4. A forward – looking monetary policy ...........................................................................10
2.2.2.5. Rational expectations econometrics ..............................................................................10
2.2.3. A DSGE new Keynes model ................................................................................................11
2.2.3.1. The theory of DSGE model ...........................................................................................11
2.2.3.2. The structure of the DSGE model .................................................................................12
2.2.3.3. The framework of policy analysis and theory of economic forecasting........................12
2.2.3.4. The variety of DSGE model ..........................................................................................13
2.2.3.5. Frictions cost of DSGE model.......................................................................................13


2.2.3.6. Advantage and disadvantage of DSGE model ..............................................................13
2.3. Literature review .......................................................................................................................14
2.3.1. Studies of monetary and macroprudential policy ...............................................................14
2.3.1.1. Foreign studies ..............................................................................................................14
2.3.1.2. Domestic studies ...........................................................................................................14
2.3.2. Studies of the SVAR new Keynes model .............................................................................14
2.3.3. Studies of the DSGE new Keynes model ............................................................................15
2.4. Summary chapter 2 ...................................................................................................................16
CHAPTER 3: METHODOLOGY RESEARCH ............................................................................... 17
3.1. For monetary and macroprudential policy .............................................................................17
3.1.1. Model ...................................................................................................................................17
3.1.2. Data research.......................................................................................................................17
3.1.3. Methodology research .........................................................................................................17
3.1.4. Research procedures ...........................................................................................................17
3.2. For the SVAR new Keynes model ............................................................................................18
3.2.1. Econometric model ..............................................................................................................18
3.2.1.1. VAR model ...................................................................................................................18
3.2.1.2. SVAR model .................................................................................................................18
3.2.2. Data research.......................................................................................................................18

4.2.2.1. Contemporaneous structural parameter estimation .......................................................25
4.2.2.2. Impulse response function .............................................................................................26
4.2.2.8. Variance decomposition ................................................................................................28
4.2.3. The third model ...................................................................................................................30
4.2.3.1. Selection of  and the lag length ..................................................................................30
4.2.3.2. DSGE model .................................................................................................................30
4.3. Summary chapter 4 ...................................................................................................................32
CHAPTER 5: CONCLUSIONS, POLICY IMPLICATIONS AND LIMITATIONS ................... 33
5.1. The key results ...........................................................................................................................33
5.1.1. Affirming the role of monetary policy in Vietnam‘s macroeconomy stability ..................33


5.1.2. Macro variables react dynamically to policy shocks ..........................................................33
5.1.3. The new Keynesian forecasting model has a meaningful analysis of policy ....................33
5.2. Policy implications.....................................................................................................................34
5.2.1. The role of SBV in using monetary policy tools .................................................................34
5.2.2. Operating monetary policy ..................................................................................................34
5.2.3. A New Keynesian model for macro forecasting .................................................................34
5.3. Limitations .................................................................................................................................34
5.3.1. Data and variables ...............................................................................................................34
5.3.2. Methodology and Viet Nam economic characteristics .......................................................34
5.3.3. Research results...................................................................................................................35
5.4. Summary chapter 5 ...................................................................................................................35


1
CHAPTER 1: INTRODUTION
1.1. The necessity of the study
The scenario of the global financial crisis has changed the perception of Central Banks in the world that the
aim of price stability is not enough to ensure financial stability. Therefore, central banks need to implement

Uncovered Interest rate Parity (UIP) and a forward-looking monetary policy rule. So, the study simulates the
reaction of macroeconomic variables including output gap, inflation, exchange rate and a policy interest rate for
four structural shocks - aggregate demand shock, aggregate supply shock, exchange rate shock and monetary
policy shock.


2
Second, the study of the new Keynes DSGE estimates forecasts for a small and opened economy like
Vietnam. The model is built and adjusted to be consistent with the forecasting target for macroeconomic variables
such as output gap, inflation, policy interest rate, exchange rate fluctuations, and terms of trade.
1.3. Objectives of the study
1.3.1. General objectives
Testing the suitable of the new Keynes model to confirm the role of monetary policy in macroeconomic
stability in Vietnam.
1.3.2. Detail objectives
First, this study assesses the importance of monetary policy in macroeconomic stability in Vietnam through
controlling the credit growth;
Second, this study evaluates the relevance of the new Keynes model in explaining macroeconomic
fluctuations;
Third, this study uses the SVAR new Keynes model to evaluate the response of macro variables to the
shocks of themselves;
Fourth, this study proposes the DSGE new Keynes model that serves to analyze, forecast and communicate
macroeconomic’s policies in Vietnam.
1.4. The study’s questions
First, whether the effectiveness of monetary policy in Vietnam is reflected through controlling credit growth
primarily?
Second, why is the new Keynes model suitable for explaining macroeconomic fluctuations in the short
term?
Thirdly, how does the shock of macro variables affect these variables through the new Keynes model?
Fourth, how is the model predict simulate by the DSGE new Keynes model for macro variables of Vietnam?

Research data include 5 observed variables including: output gap (dy_obs), interest rate (R_obs), inflation
(infl_obs), exchange rate fluctuations (de_obs), terms of trade (dq_obs) and take quarterly from quarter I/2000
- quarter IV/2016, based on the sources: IMF - IFS, WB, SBV, GSO ... The data obtained includes 63 - 65 observed
variable groups, all data are averaged for logarithmic deviation from steady state. For the purpose of making the
forecast for the last 2 quarters and 4 quarters, the study uses 63 and 65 groups of observed variables (sample) to
estimate the parameters for the forecasting model, using 2 and 4 retain samples to perform calculations for
forecasting.
1.5.2. The scope of this study
1.5.2.1. Factors affect credit growth
Source: Data sources are collected from audited financial statements of 21 JSCBs in Vietnam (Vietstock,
2018). In addition, macro variables in Vietnam are collected from reliable websites such as the General Statistics
Office (GSO) and the State Bank (SBV), IMF and World Bank (WB).
Time: Research thesis in Vietnam in the period of 2008 - 2017.
1.5.2.2. Factors affect a small opened economy
Source: Data source of macro variables in Vietnam and the United States collected from reputable websites
such as the General Statistics Office (GSO) and the State Bank (SBV), IMF - IFS and WB under the new Keynes
model through SVAR and DSGE methods.
Time: Research thesis in Viet Nam in the period of 2000 - 2017.


4
1.6. Methodology Research
1.6.1. The method of estimating variables affects credit growth
Research using table data. According to Wooldridge (2002), the study applied the Feasible Generalized
Least Squares (FGLS) method to overcome the autocorrelation and heteroskedasticity phenomenon to ensure the
estimation are reliable.
1.6.2. The method of estimating macro variables of the SVAR new Keynes model
The study uses the SVAR new Keynes model for small and opened economies suitable for Viet Nam
economy. The structural model consists of a system of equations: (i) An equation of the aggregate demand curve
(IS curve) based on the optimization behavior of economic entities; (ii) the aggregate supply equation (AS curve)

approach. This study uses the new Keynesian model with a small sample size of structural parameters (Seonghoon
& Antonio, 2014), assessing the combination of structural shocks and rational expectations. The reason for the
subjects in the economy is to consider the reaction of the previous macro variables impacted by its own shocks.
By the way, the study also assessed the appropriateness of the approach and the compatibility between theory and
practical data to build a meaningful forecasting model for Vietnam.


6
CHAPTER 2: THE THEORY BACKGROUND OF THE NEW KEYNES MODEL
2.1. Theoretial framework and literature review
2.1.1. The theory of macroprudential policy
2.1.1.1. Financial Stability
It is possible to agree on the meaning of the term as follows: Financial stability is a state in which the
financial system consists of financial intermediaries, financial markets and financial infrastructure which support
to shocks and risks caused by financial imbalances thereby reducing the possibility of collapse of existing financial
intermediaries negatively impacting savings and allocation (European Central Bank).
Within the scope of this paper, the author uses the credit growth (CRD) as an indicator of financial stability,
according to Kim & ctg (2016a) which is consistent with previous studies about its cause to the banking crisis - a
major cause of financial instability in the past (Borio & Lowe, 2002; Borio & Drehmann, 2009; Kaminsky &
Reinhart, 1999; Schularick & Taylor, 2012).
2.1.1.2. Macroprudential policy
According to Financial Stability Board (FSB), International Bank for Settlement (BIS) and International
Monetary Fund (IMF), macroprudential policy uses macroprudential tools to reduce systematic risks and/or
financial risk in order to minimize the possibility of a financial system breakdown by preventing financial services
which causing serious consequences to the real economy (IMF, 2013a). Finally, besides monetary policy and fiscal
policy, the macroprudential policy have supported the State Bank of Viet Nam (SBV) to establish a remarkable
trio in macroeconomic acting that has been used effectively in emerging and developing countries (EMEs).
2.1.2. The theory of monetary policy
2.1.2.1. Conceptual framework
Monetary policy is the decision on the monetary level at the national level of the central banks, including

- Discount rate
-Reserve
Requirement

Policy Tools
- Reserve aggregates
(reserves, nonborrowed
reserves,
monetary
base,
nonborrowed
reserves).

Intermediaries
Objective
- M1, M2, M3
- Short term and
Long
term
interest rate

Final Objective
- Price stability.
- High employment.
- Financial market
stability and so on.

Policy rate (overnight
rate, interbank rate).
Source: Mishkin (2012); Thanh & Hang (2008)

determines the target inflation target; (ii) The country has a clear policy framework for making economic decisions
- inflation targets; (iii) Central Bank has transparency and high responsibility in implementing policies. The
characteristics and factors in general research are also three key factors that Mishkin (2014) want to mention is the
independence of the Central Bank, the transparency of policies and the credibility of the Central Bank in the
implementation policy.
2.1.6.3. The goals of inflation targeting policy
According to Tram Thi Xuan Huong et al. (2014), the inflation rate that the central bank aims to determine
the expected inflation in the components of the economy and contribute to the stability of the macroeconomy.
2.1.6.4. Conditions for applying inflation targeting policy
Vietnam is not ready to implement the current inflation targeting policy because the relationship between
monetary policy instruments and inflation in Vietnam is not strong, unstable and unpredictable (Nguyen Thi My
Phuong, 2016 ). In other words, in terms of the necessary and sufficient conditions for Vietnam to implement the
inflation policy, it is immature (Hoang Hai Yen & Vu Thi Le Giang, 2011; Tran Hoang Ngan, Vu Thi Le Giang
& Hoang Hai, 2013).
2.2. Basic theories of the new Keynesian model
2.2.1. The overview of the New Keynesian theory
Kydland & Prescott (1982) provides a real business cycle model (Real Business Cycle - RBC) with a
microeconomic foundation in which households optimize benefits with income constraints, profit maximization
businesses in the binding on inputs such as minimizing costs based on capital constraints, labor, technology and
social welfare maximization. However, the RBC model also encountered some criticisms when only taking into
account the supply shock (productivity shock) without considering the demand shock, in other words within the
scope of the RBC model, the monetary policy has not to affect output and other macro variables.
This seems to be difficult to convince economists as well as central banks, leading to the emergence of a
new model that combines the RBC model and non-neutrality of the monetary policy in the short term such as the
new Keynesian school. These school-based models address policy questions such as assessing the impact of
demand shocks, the role of monetary policy, ficsal policy ... marking the combination of the microeconomic and
macroeconomic foundation. The new Keynesian tissue and advanced estimation techniques. The new Keynesian
model classes in addition to retaining the micro - foundation add more nominal rigid factors (price, salary) - which
is the cause of the non-neutrality of monetary policy in the short term (Romer & Romer, 2000), as well as true


2.2.1.3. The model structure applied in Vietnam (developed by IMF)
In Viet Nam, Dizioli & Schmittmann (2015), the development of the Dynamic Stochastic General
Equilibrium (DSGE) model for Vietnam is a new, small-scale Keynesian model inherited from the model (Berg et
al., 2006, 2010, 2013) includes: (i) an aggregate demand equation (output gap estimated by HP filter), (ii) two
Phillips curve equations (food and fuel + inflation (iii) an uncovered interest rate (UIP) equation and (iv) an
equation for the monetary policy rule (Taylor rule and exchange rate target).
2.2.2. An SVAR new Keynes model
This study introduces the New Keynesian SVAR model of Vietnam’s economy. The study used an
estimation model to simulate the dynamic responses of the output gap, inflation, exchange rate and interest rate
for four shocks: the aggregate demand shock, the aggregate supply shock, and exchange rate shock and monetary
policy shock. The model structure includes the IS curve equation based on representative optimization subject in

1

The output gap is defined as the difference between the actual output of the economy and its potential output.
(Bank of Canada, 2012). This text can be found at: bankofcanada.ca – search for ‘backgrounders”.


10
a small open economy, the new Phillips Keynesian curve (NKPC) derives from Calvo's (1983), the uncovered
interesr rate parity (UIP), and monetary policy rule towards the future.
2.2.2.1. IS equation
Output gap is described by the opened - economy equation derived from the representative household
maximization in the context of a small open economy (McCallum & Nelson, 1999, 2000).

xt  0  Et xt 1  1 (it  Et t 1 )  2 (st  pt*  pt )   tx

(2.2)

xt is the output gap, it is the short-term nominal interest rate,  t is the inflation rate, st is the exchange

 ti

(2.5)

represents the monetary policy shock. The specification follows

closely follows the forward - looking rules discussed by Clarida et al. (1998, 1999, 2000).
2.2.2.5. Rational expectations econometrics
According to Lucas (1976), expectations really play an important role in macroeconomics, altering previous
traditional methods without recognizing the role of expectation adjusting to policy changes. Sbordon et al (2010)
with the application of the DSGE model in policy analysis, research results show that the most effective method
to control inflation is through managing the "expectation" factor rather than managing the effects of policy
instruments (To Huy Vu & Nguyen Duc Trung, 2016). The way in which expectations are formed (the relationship
of expectations for information in the past) changes as the behavior of the forecast variable changes. So when


11
policy changes, the relationship between expectations and information in the past will change due to economic
behavior is affected by expectations, the relationship in the econometric model will change.
2.2.3. A DSGE new Keynes model
2.2.3.1. The theory of DSGE model
DSGE model is a branch of application of general equilibrium theory. DSGE theory tries to explain general
economic phenomena, such as economic growth, business cycle and the effects of monetary policy and fiscal
policy on the foundation of macroeconomic models deriving from microeconomic principles.
According to Sbordone et al (2010), the DSGE model is built on the micro-foundation and emphasizes the
choice of intermediaries agents. Basically, the model focuses on the behavior of 03 main macro variables in the
economy namely: Inflation, GDP growth, and short-term interest rates.

Fig 2.5. The basic structure of DSGE models
Source: Sbordone et al (2010)

According to the ECB, several key equations of the DSGE model developed by ECB are called New - Area
Worldwide Model (NAWM) which has four types of economic subjects: Households, businesses, representative
authority for monetary policy and fiscal policy.
The structure of the DSGE model for opened, small economies
The general model consists of the following elements: (i) the IS curve equation, also known as the Euler
equation, (ii) Phillips curve equation, (iii) the monetary policy is described in terms of interest rate rules, side
Besides, the exchange rate is expressed through consumer price index and purchasing power parity (PPP).
The DSGE model with 3 equations
This is a system of 3 equations summarized by Nguyen Duc Trung (2016) similar to the new Keynes
equation system presented in section 2.2.1.1 of this thesis.
The DSGE model with 4 equations
According to Lubik & Schorfheide (2007), the current DSGE structure is built on the foundation of new
Keynesian models. The development of DSGE models is also expanded when taking into account market friction
or inefficient market losses in the labor market or financial market (this expansion is particularly significant after
the global financial crisis 2008). For central banks, the application of the DSGE model is more popular, especially
in central banks pursuing the mechanism of the targeting inflation policy.
2.2.3.3. The framework of policy analysis and theory of economic forecasting
Forecasting is a process of making judgments about the future based on past and present information, as
well as trend analysis.
The predictive results chain obtained in this study is the out-of-sample forecast. For example, this involves
a person pretending to go back in time at time R in the sample set to size T and then using the data set that has been
acquired by the time R to make the project report for time R + 1. Continue to use the data set to time R and forecast


13
data at the time of R + 1 to predict the time of R + 2. Repeat this process to get a sequence of P = T - R forecasts
and an out-of-sample error function respectively. The accuracy of the forecast is then calculated by taking the
average of the error function out – of - sample. With the error function being square, the calculation of the accuracy
of this forecast is called the Mean Square Forecast Error (MSFE).
2.2.3.4. The variety of DSGE model

when the research database is not enough so that the sample is often short and measurement errors are a big
problem.


14
The disadvantage
The complicated model structure and the estimation of parameters in the model require the use of complex
techniques which makes the model difficult to control and the model does not produce good short - term forecasts.
In addition, the DSGE model using the prior information in the model will lead to the occurrence of errors for each
different economy. Besides, the predictability of the DSGE model is not good.
2.3. Literature review
2.3.1. Studies of monetary and macroprudential policy
2.3.1.1. Foreign studies
Based on the Cesa-Bianchi and Rebucci (2013) study, monetary policy in charge of price stability and
macroprudential policy responsible for financial stability. Analysis, evaluations, and models have been developed
to determine the effectiveness of monetary and macroprudential tools in many countries and regions. Some results
from this study are as follows: Valla & Escorbiac (2006), Lim & ctg (2011), Crowe & ctg (2011), Claessens & ctg
(2012), Cesa-Bianchi & ctg (2013), Wang & Sun (2013), Kuttner & Shim (2013), Angelini & ctg (2014),
Gourinchas & Obstfeld (2012), Shin (2015), (Bruno & Shim, 2015), Kim & Mehrotra (2016 ).
2.3.1.2. Domestic studies
Studies by Nguyen Minh Sang (2012), Nguyen Thi Thu Huong & Nguyen Khanh Linh (2014), Vu Thi Hai
Yen & Tran Thanh Ngan (2016), Le Tan Phuoc (2016), Le Thi Man, Nguyen Thi My Hanh & Nguyen Tan Phat
(2016). Research results show that there is a long-term relationship between credit growth and economic growth
in Vietnam.
2.3.2. Studies of the SVAR new Keynes model
No

Authors

Models and variables


Mohanty (2012)

SVAR

6

Kilinc & Tunc (2014)

7

Pham The Anh (2008)

8

Le Viet Hung & Wade D.Pfau
(2008)

9

Tran Ngoc Tho & Nguyen Huu
Tuan (2013)

10

Nguyen Khac Quoc Bao (2013)

SVAR
Domestic: Y, CPI, M3, REER,
EMBI, R


Viet Nam


15

11

Nguyen Thi Lien Hoa & Tran
Dang Dung, 2013

SVAR
World: OIL, RICE,
Domestic: NEER, Y, CPI, R, IMP,
PPI

Viet Nam
(1/2001 – 6/2011)

12

Dinh Thi Thu Hong & Phan
Dinh Manh (2013)

ECM – AGARCH(1,1)-M; based
on Wang & Lee (2009)
dr, lr, intr, reft, disr, br, mr2

13


(1/1997 – 12/2009)
Viet Nam
(2000 - 2013)
Viet Nam (1/2000 – 7/2013)

Viet Nam
(2001 – 2013); monthly
Viet Nam (Q1/1995- Q1/2015)

2.3.3. Studies of the DSGE new Keynes model
No
1
2

3

4
5
6

7

8
9

Ruge-Murcia (2007),
Ingram & Whiteman
(1994)
Smets & Wouters
(2003)

Models: Inference, Development and Communication”
Practical Model-Based Monetary Policy Analysis—A
How-To Guide
Testing for Indeterminacy: An Application to U.S.
Monetary policy

The scope of the studies
Dynamic new Keynes
Pareto model

RBC - DSGE
DSGE RBC
(wage and price rigidity)
DSGE new Keynes
(Bayesian methods)
DSGE VAR – large scale
model

DSGE

FPAS
DSGE new Keynes
DSGE
Nghiên cứu sử dụng các biến:
lỗ hổng sản lượng, lãi suất, lạm
phát, thay đổi trong tỉ giá hối
đoái và điều khoản thương mại
Mô hình DSGE, phương pháp
Bayesian với 4 nền kinh tế: Úc,
Canada, New Zealand và Anh

(2009)

Developing a Structured Forecasting and Policy
Analysis System to Support InflationForecast Targeting
(IFT)

Structured FPAS

Policy analysis using dsge models: An introduction

DSGE
3 variables, Y, core inflation
and FFR.

Forecasting with DSGE model

Bayesian DSGE

The econometrics of DSGE models

Bayesian DSGE; rigidity

14
15
16

2

Authors
Bernanke, Gertler &


The scope of the studies
DSGE

18

Ostry, Ghosh &
Chamon (2012)

19

Gabriel & Ghilardi
(2012)

Financial frictions in an Estimated DSGE Model

20

Zheng và Guo (2013)

Estimating a small open economy DSGE model with
indeterminacy: Evidence from China

DSGE for open economy

21

Leonardo & Federico
(2013)


28

29

Nguyen Duc Trung
(2016)
Allan & Jochen
(2015)
Phuc Huynh, Trang
Nguyen, Thanh
Duong, Duc Pham
(2017)
Nguyen Duc Trung &
Nguyen Hoang
Chung (2017)

Modeling Sterilized Intervention and Balance Sheet
Effect of Monetary Policy in a New Keynesian
Framework
A DSGE Model for China’s Monetary and
Macroprudential Policies
Frictions in DSGE models” Revisiting New Keynesian
vs New Classical Results
Forecasting with DSGE model: What frictions are
important?
Technical report on construction, receiving technical
support, application and recommendations for using
DSGE models in the Department of Forecasting and
Statistics
Application of the DSGE model in the analysis of

Chapter 2 provides the basic theory for fiscal policy and monetary policy to maintain financial stability, an
important goal to stabilize the macro economy. In particular, the study refers to the basic theory of macroprudential
policy, monetary policy, transmission channels of monetary policy, the relationship between money supply and
inflation and the SVAR and DSGE new Keynesian models. This is considered a framework for analyzing monetary
policy through shocks and simulating the forecast of macro variables. In addition, Chapter 2 synthesizes domestic
and foreign research works related to macroprudential policy, monetary policy is analyzed through SVAR and
DSGE models to create a solid theoretical basis for this study.


17
CHAPTER 3: METHODOLOGY RESEARCH
3.1. For monetary and macroprudential policy
3.1.1. Model

crdit  0  1rrrit   2 drit  3carit   4liqit  5ldrit   6 gdpit   7 cpiit  eit
3.1.2. Data research
The data is taken from the 21 joint stock commercial banks in Vietnam in the period 2008 - 2017, including
some banks listed on Ho Chi Minh City Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX), data
sources are collected from audited financial statements. In addition, macro variables collected by authors from
reputable websites such as the General Statistics Office and the State Bank.
Table 3.1. How to measure micro and macro variables and sources of collection
Denote

Variables

Expectations

Calculation methods

Source studies

deposits and less than 12
months.

DR
(dr)

Discount rate

-

The average
interest rate

CAR
(car)

Capital
adequacy ratio

+

The ratio of equity/ Risk
Weighted Assets

Vandenbussche & ctg (2012);
Vu Thi Hai Yen et al (2016)

LIQ
(liq)


(real GDPi – real GDPi-1)/(real
GDPi-1) x 100%.

CPI
(cpi)

Consumer Price
Index

-

(CPI năm i - CPI năm i –
1)/CPI năm i – 1

Vu Thi Hai Yen et al (2016); Lê
Tấn Phước (2016); Le Thi
Man& ctg (2016).
Angelini & ctg (2012); Vu Thi
Hai Yen et al (2016)

re-discount

Source: Summary of the author from many different studies.
3.1.3. Methodology research
This study applies the Feasible Generalized Least-squares Estimation method (FGLS) to correct autocorrelation, heteroskedasticity to ensure consistent and effective estimators.
3.1.4. Research procedures
Step 1: Descriptive statistics research data.
Step 2: Analyze the correlation of variables by setting the correlation coefficient matrix.