The Effectiveness of Macroprudential Policies on Credit Growth in Vietnam

Abstract

This study presents a comprehensive analysis of the effectiveness of macroprudential policies on credit growth in Vietnam. It introduces an advanced approach to create a macroprudential index (MPI) that measures the state of macroprudential policy. The MPI is then applied to a high-frequency database on a monthly basis to estimate its impact on real credit growth and the country's credit growth cycle. The study's comprehensive nature is evident in the manual survey of the policies of the State Bank of Vietnam and the information published by commercial banks from January 1999 to June 2023. The findings reveal that, unlike flexible monetary policy, macroprudential policy tools have gained prominence and have been tightened since 1999. Moreover, empirical evidence suggests that tightening macroprudential policies in Vietnam has helped reduce real credit growth, although they have not been effective in smoothing real credit growth cycles.