The role of different channels in transmitting monetary policy into output and price in Vietnam. The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. | Journal of Economics and Development, , , April 2015, pp. 20-40 ISSN 1859 0020 The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam Nguyen Thi Thuy Vinh Foreign Trade University, Vietnam Email: vinhntt@ Abstract The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market. Keywords: Monetary transmission channel; output; price; VAR; Vietnam. Journal of Economics and Development 20 Vol. 17, , April 2015 1. Introduction isolate their individual roles in terms of how money affects the channel, how the channel affects real output and inflation, and how the impact of money on real output and inflation is changed after controlling for the effects of the channel. Most economists would agree that monetary policy can significantly affect the course of the real economy, at least in the short run. Therefore, it is crucial to have a good understanding of the channels through which monetary policy is transmitted. According to many textbooks, an increase in the money
