Phân tích phản ứng của các biến số vĩ mô trước cú sốc chính sách tiền tệ thông qua mô hình keynes mới nhằm nâng cao chất lượng dự báo kinh tế vĩ mô của việt nam tt tiếng a

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

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

ACADEMIC ADVISOR
1. Assoc. Prof., Ph.D. NGUYEN DUC TRUNG
2. Ph.D. LE DINH HAC

HO CHI MINH CITY - 2019


LIST OF AUTHOR’S PUBLICATION*

No

Name of publications
Analysis of Monetary Policy shocks in the New

1 Keynes model for Viet Nam’s Economy:

Publication’s

Publication’s

Publication’s

number

year

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

Nam – regarding credit growth.
Viet Nam’s macroeconomy – Analysis and
4 forecasting: 2018 – Actively respond to shocks
to maintain macroeconomic stability.

978-604-971-

2018

2019

before the decisive turn.
Determinants of debt to market value ratio: the
case of Viet Nam.

of

2017

monetary

ISSN
1859 – 4050

companies in Vietnam.
effect

ISSN
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

2017
0866 - 7802

0866 – 7802

Note: The publications (1), (2), (3), (8) relate directly to this thesis.
(*) Each study presented includes: cover page, table of contents, articles.

Banking Technology
Review
External Economics
Review

Economics Technology
Journal of

ISSN
9 A New Keynes model without the LM curve

HCMC Workshop

Journal of

ISSN

8 macroprudential policy to financial stability in
Viet Nam

2017

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

1.9. The structure of study .................................................................................................................4
1.10. Summary Chapter 1.....................................................................................................................5
CHAPTER 2: THE THEORY BACKGROUND OF THE NEW KEYNES MODEL .................... 6
2.1. Theoretial framework and literature review ............................................................................6
2.1.1. The theory of macroprudential policy ..................................................................................6
2.1.1.1. Financial Stability ...........................................................................................................6
2.1.1.2. Macroprudential policy ...................................................................................................6
2.1.2. The theory of monetary policy ..............................................................................................6


2.1.2.1. Conceptual framework ....................................................................................................6
2.1.2.2. Monetary policy transmission .........................................................................................6
2.1.2.3. The basic principles of monetary policy .........................................................................6
2.1.2.4. The purpose of the monetary policy ................................................................................7
2.1.3. The theory of general equilibrium ........................................................................................7
2.1.4. The theory of aggregate supply – aggregate demand...........................................................7
2.1.5. The theory of money supply and inflation ............................................................................7
2.1.6. The framework of the inflation targeting policy ..................................................................8
2.1.6.1. The conception ................................................................................................................8
2.1.6.2. Characteristics and key factors of inflation targeting policy ...........................................8
2.1.6.3. The goals of inflation targeting policy ............................................................................8
2.1.6.4. Conditions for applying inflation targeting policy ..........................................................8
2.2. Basic theories of the new Keynesian model...............................................................................8
2.2.1. The overview of the New Keynesian theory ..........................................................................8
2.2.1.1. The New Keynesian model structure with 3 equations ...................................................9
2.2.1.2. The New Keynesian model structure with 4 equations ...................................................9
2.2.1.3. The model structure applied in Vietnam (developed by IMF) ........................................9
2.2.2. An SVAR new Keynes model ................................................................................................9
2.2.2.1. IS equation.....................................................................................................................10
2.2.2.2. AS equation ...................................................................................................................10

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

3.2.3. Methodology research .........................................................................................................19
3.2.4. Research procedures ...........................................................................................................19
3.2.4.1. Diagnostics of the reduced form VAR model ...............................................................19
3.2.4.2. Contemporaneous structural parameter analysis ...........................................................19
3.2.4.3. Impulse response function (IRF) ...................................................................................19
3.2.4.4. Variance decomposition ................................................................................................19
3.3. For the DSGE new Keynes model ............................................................................................19
3.3.1. Model ...................................................................................................................................19
3.3.1.1. The IS equation .............................................................................................................19
3.3.1.2. The New Keynes Phillips curve equation .....................................................................20


3.3.1.3. Monetary policy equation..............................................................................................20
3.3.1.4. Other equations .............................................................................................................20
3.3.2. Data research.......................................................................................................................20
Source: Summary of the author from many different studies. ........................................................20
3.3.3. Methodology research .........................................................................................................20
3.3.4. Research procedures ...........................................................................................................21
3.3.4.1. Procedures estimation for BVAR – DSGE model ........................................................21
3.3.4.2. Priors for the DSGE model ...........................................................................................21
3.5. Summary chapter 3 ...................................................................................................................22
CHAPTER 4: RESEARCH RESULTS AND DISCUSSION........................................................... 23
4.1. Descriptive statistics ..................................................................................................................23
4.1.1. Micro variables data ............................................................................................................23
4.1.2. Macro variables data ...........................................................................................................23
4.2. Empirical analysis .....................................................................................................................25
4.2.1. The first model .....................................................................................................................25
4.2.1.1. FGLS results and discussions ........................................................................................25
4.2.1.2. Robustness of FGLS model ...........................................................................................25
4.2.2. The second model ................................................................................................................25

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

measures and policies aimed at financial stability through monetary and macroprudential policies. Accordingly,
the evaluation, analysis and forecast of economic development, especially some key macro indicators, play a very
important role in planning economic strategies and macroeconomic policies. Vietnam's economy is growing
rapidly and deeply integrating into the world economy so opportunities and challenges for the process of economic
development are increasing, requiring rapid improvement research capacity, macroeconomic forecast in Vietnam.
In Vietnam, when macroprudential tools are incomplete, the macroprudential policies have not been able
to fulfill the role of financial stability, so tools’s monetary policy still play an important role in stabilizing and
regulating macroeconomy (Nguyen Duc Trung & Nguyen Hoang Chung, 2018). From that role, this study is based
on the new Keynes model for small and opened economies as Vietnam through rational expectations of agents in
the economy. This approach aims to evaluate the response of important macro variables in monetary policy such
as output gap, inflation, exchange rate, and policy interest rate before the shocks of themselves to identify key
variables, thereby contributing to improving efficiency in policy analysis.
In recent years, the construction and application of economic models to forecast the economy in Vietnam
has improved significantly in recent years and has made an increasingly larger contribution to the policy - making
procedures. However, there are not many in - depth studies on the development of Dynamic Stochastic General
Equilibrium (DSGE) based on the new Keynesian framework in Viet Nam’s macroeconomic forecast. Therefore
the DSGE model has a stronger theoretical foundation than traditional models. For these reasons, the application
of DSGE and SVAR models under the new Keynes framework is becoming more popular at central banks,
gradually adding and replacing classical econometric models, especially in central banks which pursued the
mechanism of inflation targeting policy.
1.2. Setting research issues
The thesis finds evidence that the monetary policy tools have a stronger influence than the macroprudential
tools in maintaining financial stability in Vietnam. Besides, the study confirms again that Vietnam's economic
growth depends heavily on credit growth. Therefore the effectiveness of monetary policy is shown through
controlling credit growth is still mainly so that it is showing the important role of the State Bank in contributing to
macroeconomic stability in Vietnam. This is an important point for Keynes's theory (Keynes, 1936) to be applied
and developed in this research.
First, the SVAR new Keynes model includes the dynamic IS equation based on the marginal utility
optimization representation of the subjects in opened and small economies, the aggregate supply equation (AS) or
the new Keynes Phillips curve (NKPC) is based on Calvo's (1983) research on a staggered price model, the

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?

1.5. Objectives and scope of the study
1.5.1. The study’s objectives
1.5.1.1. The factors of monetary policy and macroprudential policy affect credit growth
Factors affecting the credit growth of joint-stock commercial banks (JSBs) in Vietnam during the period
2000 - 2017.
1.5.1.1.1. Dependent variables
This study uses the TTTD (credit growth - CRD) indicator as the power index for financial stability.
1.5.1.1.2. Independent variables
The index of credit growth (crd) may reflect the level of risk of banks and these indicators will reflect the
ability of sustainable and stable development of the financial system in the future. In addition, independent
variables representing monetary policy are reserve requirement ratio (rrr) and discount interest rate (dr); The


3
macroprudential policy represents the capital adequacy ratio (car), liquidity reserve ratio (liq), the ratio of
outstanding loans to deposit ratio (ldr) and control variables to reduce the impact of omitted variables bias and
estimation phenomena are unreliable (unstable model, estimated coefficient has no statistical significance, ...)
economic growth (GDP) and inflation rate ( CPI).
1.5.1.2. Macroeconomic variables of the New Keynes model
1.5.1.2.1. The framework of the SVAR new Keynes model
Macro variables affecting the monetary transmission mechanism in the new Keynesian model of SVAR
follow a rational expectation approach.
The data series used for this study include the policy interest rate (r): Before 2010, data according to the
IMF - IFS is the interest rate of the State Treasury bill (treasury bill rate); After 2010, this data was IMF - IFS
standardized as policy rate. The output gap variable (dy_hp): The output gap is calculated by the log difference
between the real output and the HP filter (IMF – IFS). The exchange rate (lne): Exchange rate derived from
USD/VND of IMF - IFS; take logarithm nepe (ln) to shrink data, to estimate more accurately. Inflation (pi): This
index is represented by the quarterly domestic consumer price index, taking data from IMF - IFS. For foreign
variable groups including inflation (cpi_us) and US Federal Fund interest rate (int_us); collect data by IMF IFS and the Federal Reserve Board of Governors (FED).
1.5.1.2.2. The framework of the DSGE new Keynes model

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)

or a New Keynesian Phillips curve (NKPC); (iii) an uncovered interest rate parity (UIP) and (iv) a forward looking interest rate equation.
1.6.3. The method of estimating macro variables of the DSGE new Keynes model
Application of model estimation methods in the process of building and developing the DSGE model for
small and open economy such as Vietnam.
1.7. The scientific and practical significance of the thesis
This study tests and verifies conclusions about the role of monetary policy that ensuring financial stability
when the macroprudential policy is still unaccomplished in Vietnam.
This research builds a new Keynes model to analyze policies and macroeconomic forecast, identify and
measure shocks, serve the planning and administration of the monetary policy of the State Bank in Viet Nam.
The solutions complete the DSGE new Keynes model and solutions to improve monetary policy in Vietnam.
1.8. Research gap
Reaffirming the importance of the new Keynesian model in policy analysis through structural shocks of
macro variables. There are shreds of evidence that monetary policy instruments have a stronger influence than
macroprudential tools in maintaining the financial stability in Vietnam, this is the foundation for using the Keynes
model in this thesis. About policies research, under the hypothesis of rigid price and wage, the school of new
Keynes is more suitable for analyzing monetary policy than other policies (Nguyen Duc Thanh, 2010).
Developing the DSGE new Keynes model to simulate macroeconomic forecasting in Vietnam;
recommendations on the use of the SVAR and DSGE new Keynes model in policy communication of the SBV.
1.9. The structure of study
Chapter 1: Introduction
Chapter 2: The theory background of the new Keynes model
Chapter 3: Research method
Chapter 4: Research results and discussion
Chapter 5: Conclusions, policy implications and limitations of research.


5
1.10. Summary Chapter 1
The research confirms the important role of monetary policy in controlling macroeconomic stability in
Vietnam. Then, this study builds a new Keynesian model for a small open economy with an SVAR and DSGE

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

the decision to stabilize the value of money expressed by the inflation target, decide to use tools and measures to
implement the set objectives (Ly Hoang Anh & Le Thi Man, 2012). Monetary policy is an important part of the
macroeconomic policy, including the views, guidelines, and policies to manage and regulate the currency in the
economy through the banking system with the main role of the SBV.
2.1.2.2. Monetary policy transmission
Bên cạnh việc tóm lược lại các kênh truyền dẫn của CSTT, nghiên cứu tập trung trình bày về kênh kỳ vọng
hợp lý, một khái niệm cơ bản của trường phái Cổ điển Mới có khuynh hướng được hấp thu bởi trường phái Keynes
mới (Nguyễn Đức Thành, 2010).
2.1.2.3. The basic principles of monetary policy
Basic principles derived from the theory and empirical research of most central banks: (1) Inflation always
exists in the economy (Friedman & Meiselman, 1963; Mishkin, 2010a); (2) Stable prices have important benefits;
(3) There is no long-term trade-off between inflation and unemployment; (4) The expectation plays an important
role in determining inflation and monetary policy transmission mechanism for the macroeconomy; (5) real interest
rate increases when inflation increases, i.e., Taylor rule; (6) Monetary policy depends on inconsistent time issues;
(7) The independence of central banks helps improve the effectiveness of monetary policy; (8) Commitment with


7
a firm nominal anchor is the basis for an effective monetary policy; (9) Financial friction plays an important role
in the business cycle.
2.1.2.4. The purpose of the monetary policy
The central banks implement monetary policy towards macroeconomic stability, employments, financial
stability but price stability is always the most important goal (Cecchetti & Krause 2002; Geraats, 2002 Issing,
2004; Spyromitros & Tuysuz, 2012; Van der Cruijsen & Demertzis, 2007; Jean Louis & Balli, 2013).
Price stability or inflation control policy is a top target and a long-term goal of monetary policy.
Table 2.1. Monetary policy targets
Tools of the
Central Banks
- Open Market
Operations.

- 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)

2.1.3. The theory of general equilibrium
The general equilibrium theory is a branch of economics that attempts to explain the behavior of supply,
demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the
interaction of demand and supply will result in an overall general equilibrium.
2.1.4. The theory of aggregate supply – aggregate demand
Based on the theory of Mishkin (2012) and Nguyen Van Ngoc (2009), the study shows the fluctuation of
the economy generally originated from changes in the aggregate supply and demand. The exogenous changes in
aggregate demand and supply curves are shocks to the economy. Shocks break the stability which causing the
unbalanced output and employment. Therefore, studies of supply and demand shocks to assess macroeconomic
policy can minimize the impact of shocks cause to the economy.
2.1.5. The theory of money supply and inflation
According to Milton Friedman's theory, the relationship between money supply and inflation is shown by
the quantitative equation: M*V = P*Y. Therein: M is a volumn of money, V is turned over of money, P is price,
Y is output (real GDP). The quantitative equation can be written as percentages as follows:
% change of M + % change of V = % change of P + % change of Y (i)
Or: % change of M = % change of P + % change of Y - % change of V (ii)
In Vietnam, money supply in the economy is mainly through commercial banks' lending channels. Thus,
equation (ii) shows that real economic growth rate and an inflation rate will determine the rate of credit growth.


8
2.1.6. The framework of the inflation targeting policy
2.1.6.1. The conception
According to Ha Thi Thieu Dao (2012), the inflation targeting mechanism is a policy that the central bank
will directly and publicly introduce inflation (framework) as a priority and direct target. Inflation is the only
indicator that is specified in numbers while other goals such as full employment, or reducing exchange rate
fluctuations are also pursued but those are not a priority target. In contrast to monetary policy under the inflation
targeting mechanism, others indirectly affect inflation through the target of money supply or exchange rate target.
2.1.6.2. Characteristics and key factors of inflation targeting policy
The target inflation system has three important characteristics (Lars, 1999): (i) Central Bank clearly

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

9
rigid factor (from capital adjustment costs) to explain the impulse response function (IRF) in empirical model
research.
The paper builds a model similar to the new Keynes models contributed by Clarida, Gali, and Gertler (1998,
1999, 2000), the main building blocks in all models include: (i) An IS equation illustrates the relationship between
the output gap and real interest rates; (ii) A Phillips curve illustrates the relationship between inflation and the
output gap; (iii) And the monetary policy rules are evaluated according to or derived from the loss function. In
addition, in order to expand the new Keynesian model for the open economy, consideration should be given to the
influence of international commodity markets and international financial markets on the domestic economy.
2.2.1.1. The New Keynesian model structure with 3 equations
According to Nguyen, D. T (2016), the standard New Keynesian model includes: A New Keynesian
Phillips, an IS curve, and a Taylor rule (1993). Specifically in the empirical modeling for Vietnam, the new
Keynesian model is rewritten as follows:

xt  a1 xt 1  a2 xt 2  a3 (it   t )  ut ,

 t  b1 t 1  b2 t 2  b3 xt  et ,
it  c1it 1  c2it 2  c3 t  c4 xt  vt .

(2.1)

In (2.1); where 𝑥𝑡 , 𝜋𝑡 and 𝑖𝑡 are the output gap1, the difference in inflation (compared to target inflation)
and the interest rate difference (relative to the natural rate) respectively; 𝑢𝑡 , 𝑒𝑡 and 𝑣𝑡 are the shock of the IS
equation, the New Keynesian Phillips (NKP) equation and the monetary policy equation.
2.2.1.2. The New Keynesian model structure with 4 equations
The study lists important logarithmic linear equations in the model (Gali & Monacelli, 2002; del Negro and
Schorfheide, 2005; Lubik & Schorfheide, 2007) and is summarized by four equations: (i) equation IS curve, (ii)
Phillips curve equation, (iii) monetary policy equation and (iv) trade terms equation combined with the equation
of world production and inflation variables (Nguyen Duc Trung & Nguyen Hoang Chung, 2017).

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

rate denoting the corresponding domestic currency of a unit of foreign currency, pt is the price, denote (*)
indicates foreign variables, and Et is the expected condition based on the information available to the economic
agents at time t.

2.2.2.2. AS equation
The key theme in the New Keynesian model related to price adjustment is the combination of nominal
rigidity and optimizing behavior of firms that generate dynamic inflation expectations. The new Phillips Keynesian
curve (NKPC) derives from Calvo's (1983) nominal pricing model, compared to an external shock,

 t , which is

given by:

 t  0  1Et t 1  2 xt   t

(2.3)

2.2.2.3. Uncovered Interest Parity (UIP)
A standard feature in most small open economic models is the inclusion of uncovered interest rate balances
to describe the nominal exchange rate:

st  Et st 1  (it  it* )   ts

(2.4)

2.2.2.4. A forward – looking monetary policy

it   0   t   1 ( Et t 1   T )   2 xt   ti
where πT is the target inflation rate and

 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)

In Figure 2.5, three blocks (supply, demand and monetary policy equations) form a trio of triangles. The
demand block defines the real output (y) as a function of the real expected interest rate variables (nominal interest
rate minus expected inflation) or (i - πe) - and the real expected output (ye). The straight line connecting supply
and demand blocks show that the level of output (y) is an important input in measuring inflation (π) with expected
future inflation (πe).
The determination of output and inflation from the demand and supply blocks to the monetary policy
equation (dashed line). This equation describes the Central Banks setting nominal interest rates, often described as
functions that represent inflation and real output. By adjusting the nominal interest rate, the monetary policy
changes the impact on real output and through inflation, which is represented by the relationship between monetary
policy and demand and then supply. The policy rules establish a circle, showing a perfect model with the
relationship between 3 endogenous variables: output (y), inflation (π), and nominal interest rate (i). One of the
basic characteristics of the DSGE model is the dynamic interaction between the three blocks - the dynamic aspect


12
of the DSGE model - in the sense that future expectations are the determinants of current results. Accordingly,
future output and inflation depend on the expectation of the present, the monetary policy of the future also depends
on the current policy actions.
The basic feature of the DSGE model is the dynamic interaction between the blocks, the "dynamic" factor
here means that the predictive factor for the future is the determining factor for the behavior at the present. The
model highlights the role of "estimation" and the dynamic interaction between blocks. The impact of the expected
factor on the economy is shown through the arrow from monetary policy to demand block and then to supply block
when output and inflation are determined. This emphasizes that monetary policy has a crucial impact on the
"expectation" factor.
Finally, the sufficient conditions for building DSGE models include: (i) the first is the monopolistic
competitive market; (ii) the second is the role of money (Wallace, 2011; Seitz & Schmidt, 2013); (iii) a regulatory
authority on monetary policy with the control of economic shocks. In addition, it is necessary to add the inertia
factor of the shocks - the lag of shocks, consumer demand, investment, the change of the capital.
2.2.3.2. The structure of the DSGE model
The structure of the DSGE model for opened, medium and large economies

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

The study refers to the 5 model groups with the highest level of policy explanations including: (i) the
Ramsey model (1928); (ii) the IS – LM, AD – AS model (Hicks, 1938); (iii) the Solow – Swan model (Solow &
Swan, 1956); (iv) the Ramsey random model (RBC/ DSGE model) – King et al (1998) and (v) the New Keynesian
model (Clarida et al, 1999).
In the scope of this thesis, a general study of the foundation for building the DSGE model according to the
RBC and new Keynes theory.
Trong phạm vi luận án này, nghiên cứu khái quát nền tảng xây dựng mô hình DSGE theo lý thuyết Keynes
mới nhưng có khảo lược mô hình chu kỳ kinh doanh thực (Real Business Cycle - RBC) của Kydland và Prescott
(1982).
The real business cycle theory
The real business cycle theory (RBC) began to emerge in the early 1980s thanks to the important
contribution of Kydland & Prescott (1982). This theory is based on Ramsey's neoclassical growth model, with
important improvements being the study of real shocks (natural shock, technology shock ...) that can cause periodic
fluctuations in assumptions of the flexible price, wage.
The new Keynes theory
The DSGE new Keynesian model inherits the micro-foundation from RBC and adds nominal rigidities from
price and wage which focusing on solving problems related to Keynes's rigidity price hypothesis and building
micro-foundations for these hypotheses.
2.2.3.5. Frictions cost of DSGE model
The studies laid the foundation for the concept of financial friction in the DSGE model including Bernanke,
Gertler & Gilchrist (1999) and Iacoviello (2005). According to Christiano, Eichenbaum & Evans (2005), the
nominal and real frictions of nominal market friction are like sticky prices, sticky wages, and the changes of capital,
the cost of adjusting capital and inheritance in the habit persistence during the estimation procedure.
2.2.3.6. Advantage and disadvantage of DSGE model
The advantage
DSGE is not the only intensive model of personal behavior but models that have a clear microeconomic
foundation with fundamental assumptions based on the optimization of economic representatives below the
expectations.
DSGE model is considered as a useful tool for quantitative policy analysis in macroeconomics and also a
prominent tool for the Central bank's forecasting statistics. This advantage is particularly suitable for Vietnam

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

SVAR – small and open
economies
Domestic:
Y, P, M, R, E
US: Y*, P*, R*
SVAR

1

Raghavan & Silvapulle (2008)
Pagan, Catão & Laxton (2008)

2

Ncube & Ndou (2011)

3

Acosta-Ormaechea & Coble
(2011)

4

Leu (2011)

The SVAR new Keynes
Output gap, INF, R, E.
US: US. CPI & FFR.

5

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

Foreign: WIPI, FFR
SVAR – IP, CPI, M2 và R
VAR
Domestic: Y ( price in 1994); CPI
(2000); M2; R, Crd; E (REER)
Foreign: Oil, Rice, FFR
SVAR; Perior and Post WTO
Foreign: OIL.US, R. US
Domestic:
Y, CPI, M2, R, E

The scope of the studies
Malaysia (1/1980 - 6/1997 & 1/1998 5/2006);
Brazil
Nam Phi – QI/1975 – Q4/2009.
Peru & Uruguay
Chile and New Zealand
Norway
Australia (Q1/1984 – Q4/2009), quarterly

India
Bangladesh
Turkey
(1/2006 – 6/2013)

Viet Nam
Việt Nam (Q2/1996 – Q4/2005)

Viet Nam
(1/1998 – 5/2012)

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

Nguyen Phuc Canh (2014)

SVAR

14

Tram Thi Xuan Huong, Vo Xuan
Vinh & Nguyen Phuc Canh
(2014)

15

Huynh Thi Cam Ha et al (2014)

16

Cao Thi Y Nhi & Le Thu Giang
(2015)

VAR: perior and post WTO
SP500; FFR (3 month); VN –
index
VECM
MS, R, CPI, E, IP, VN Index
The structure model
INF, R, E, CRD, M2

Viet Nam, China, Indonesia, Malaysia,
Phillipines, Singapore, Korea, Hongkong,
Thailand

(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)

An & Schorfheide
(2006)
del Negro,
Schorfheide, Smets &
Wouters (2005)
Canova (1994),
DeJong et al. (2000),
and Geweke (1999a)
Berg, Karam &
Laxton (2006)
Lubik & Schorfheide
(2004)

Models and variables
The financial accelerator in a quantitative business
cycle framework
Optimal monetary policy with staggered wage and
price contracts
Methods to estimate dynamic stochastic general
equylibrium models” & “Supplanting the minnesota
prior - forecasting macroeconomic time series using
real business cycle model priors
An estimated dynamic stochastic general equilibrium
model of the Euro area
Bayesian analysis of DSGE models
On The Fit And
Forecasting Performance Of New Keynesian models
Statistical Inference in Calibrated Models”, “A
Bayesian Approach to Dynamic Macroeconomics” &
“Using Simulation Methods for Bayesian Econometric

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

DSGE dưới tác động của lạm
phát mục tiêu, sử dụng các biến
số R, INF, Y, E, Tot

10

Hodge et al (2008)

A small BVAR-DSGE model for forcasting the
Australian economy

11

Lubik & Schorfheide
(2003)

Do central banks respond to exchange rate
movements?. A structural investigation

12

del Negro và
Schorfheide (2009)

Inflation dynamics in a small openeconomy model
under inflation targeting: Some evidence from Chile

13

Laxton, Rose & Scott

(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 &

Gilchrist (1998)
Erceg, Henderson và
Levin (2000)

Sbordone,
Tambalotti, Rao &
Walsh (2010)
Kai, Gunter & Anders
(2010)
Fernandez Villaverde. J (2010)

dr, lr, intr, reft, disr, br, mr theo thứ tự là ký hiệu của lãi suất tiền gửi, lãi suất cho vay, lãi suất liên ngân hàng,
lãi suất tái cấp vốn, lãi suất chiết khấu, lãi suất ngân hàng trung ương và lãi suất thị trường, lấy theo đơn vị %/năm
cuối mỗi tháng.


16
No
17

Authors
Rochell & Refet
(2010)

Models and variables
How useful are estimated DSGE model forecast for
Central Bankers?
Two Targets, Two Instruments: Monetary and
Exchange Rate Policies in Emerging Market
Economies

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)

Should monetary policy lean against the wind?

DSGE

22

Benes, Berg, Portillo
& Vavra (2013)

23

Sinclair & Sun (2014)

24

Renato & Eran (2016)

25

Nalban (2017)

25

Bui Thi Trang Dung
& Nguyen Thi Giang
(2015)

26
27

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

aggregate demand of Vietnam's economy
A Macro-Model Approach to Monetary Policy
Analysis and Forecasting for Vietnam

DSGE new Keynes

DSGE new Keynes
DSGE
DSGE
DSGE
Based on SW in EU (2003) and
SW in the U.S (2007)
(Q1/2004 – Q2/2016)
DSGE

DSGE
DSGE – FPAS

Leaning against the Wind Policies on Vietnam’s
Economy with DSGE Model

DSGE – Lean against the wind
policy

Forecasting model for small and open economy in Viet
Nam – The approach methods: BVAR - DSGE

DSGE BVAR

2.4. Summary chapter 2

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

Biến phụ thuộc
CRD
(crd)

Credit growth

Percentage of debt balance at
the end of the year.

Kim & ctg (2016)

Vandenbussche, Vogel &
Detragiache (2012); Galati &
Moessner (2013); Wang & Sun
(2013); Vu Thi Hai Yen et al
(2016).
Vu Thi Hai Yen et al (2016)

Biến độc lập
RRR
(rrr)

Requirement
reserve

-

The requirement reserve ratio
is applied to non-term VND

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)

Liquidity ratio

+

liquid assets / total liabilities

Valla & Escorbiac (2006); Vu
Thi Hai Yen et al (2016); Lê
Tấn Phước (2016)

LDR
(ldr)

Loan to Deposit
ratio

+

Total loans/ total deposits

Vu Thi Hai Yen et al (2016)

GDP
(gdp)

Gross Domestic
Product

+

(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.