Is Lending Standard Channel Effective in Transmission Mechanism of Macroprudential Policy? The Case of Vietnam

This study aims to evaluate the effectiveness of lending standards in macroprudential policy (MaPP) transmission mechanism in Viet Nam during 2000–2016. By employing the regression model, the paper suggested that restriction on institutional entities that could borrow foreign currency denominated loans from banks was the most effective MaPP instrument in Viet Nam. However, the paper provides empirical evidence that setting higher risk weights on loans to securities and housing sectors than other types of loans has an unexpectedly reverse impact on credit growth. In spite of mix results among each MaPP measures, interestingly, the model suggested that overall macroprudential package expressed by the MaPP index was effective in Viet Nam.

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