This paper explores transmission of monetary policy through commercial bank lending channel in Vietnam in 2003-2012 by examining reaction of each bank to changes in monetary policy. | JED January 2014| 49 Effects of Bank Characteristics Effects of Bank Characteristics on Transmission of Monetary Policy Through Bank Lending Channel in Vietnam NGUYỄN PHÚC CẢNH University of Economics HCMC NGUYỄN QUỐC ANH University of Economics HCMC quocanhthuthao@ NGUYỄN HỒNG QUÂN Đại Dương Commercial Bank – Cà Mau Branch quannh@ ARTICLE INFO ABSTRACT Article history: Received: June 27, 2013 Received in revised form Sep. 03, 2013 Accepted: Dec. 31, 2013 Credits from commercial banks influence various economic components, such as investment and consumption of durables and changes in monetary policy and therefore, affect the economy through supply of credits by commercial banks. This paper explores transmission of monetary policy through commercial bank lending channel in Vietnam in 2003-2012 by examining reaction of each bank to changes in monetary policy. Authors use the GMM (generalized method of moments) for panel data gathered from financial statements of commercial banks in 2003-2012. Results show that GMM helps detect the existence of bank lending channel in the transmission mechanism in Vietnam, and bank characteristics relating to equity capital, liquidity assets and risk degrees affect their flexibility when responding to changes in monetary policy in the surveyed period. Keywords: monetary policy, transmission, credit, bank characteristics. 50 | Nguyễn Phúc Cảnh, Nguyễn Quốc Anh & Nguyễn Hồng Quân | 49 - 65 1. INTRODUCTION a. Necessity of the Research: Vietnam’s economy, especially its banking system, faced many difficulties after the 1997 global economic crisis. The SBV had changed from a loose monetary policy in 2000-2005 to a tighter one in 2009-2012. According to the traditional economic theory, the monetary policy affects not only growth of credit but also banks’ risks. On the other hand, reactions by commercial banks to the monetary policy also produce various effects on the .
