Monetary Policy in Vietnam: Changes Over Time

ABSTRACT In the past decades, Vietnam has experienced a prolonged period of rapid economic growth. Many argued that the State Bank of Vietnam (SBV), which is an essential part of the Vietnamese government, makes a significant contribution to that achievement. However, high inflation in certain periods raises doubts about that compliment. Furthermore, studies of monetary policy in Vietnam mostly relied on constant‐parameter models such as VAR, which may not be proper as economic structure and monetary policy conduct have been changing in Vietnam. Therefore, it is of importance to have a rigorous study about how monetary policy conduct varies over time in Vietnam. This paper uses a TVP‐VAR model to investigate possible shifts in the implementation of monetary policy in Vietnam over the period 2008–2024. We find that monetary policy has a significant response to exchange rate and its effectiveness is open to question. The price puzzle persistently exists across periods. Furthermore, the role of exchange rate is non‐trivial and increasing. Global commodity prices become more important, especially in the post Covid‐19 period.