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Impacts of Monetary Policy on Commercial Banks’ Profits: The Case of Vietnam

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  • Thanh Nhan Nguyen
  • Ngoc Huong Vu
  • Ha Thu Le

Abstract

This paper mainly concentrates on examining the impact of monetary policy on commercial banks’ profit in Vietnam by using panel data regression. In our study, the data is collected from 20 commercial banks which were doing business in Vietnam’s banking market, ranging from 2007 to 2014 in annually frequency. Monetary base (MB), discount rate (DIS) and required reserve ratio (RRR) are used as proxies for monetary policy. Profit before tax (PROFIT) is used to represent commercial banks’ performance. The results show that there is a positive relationship between banks’ profits and monetary policies. Among those chosen variables representing SBV’s monetary policy, only MB has a significant positive impact on bank’s profit at the significance level of 10%. On this premise, the study recommends that MB should be one of the variables in the center of being concerned in the SBV’s policies regarding the banking performance and stability.

Suggested Citation

  • Thanh Nhan Nguyen & Ngoc Huong Vu & Ha Thu Le, 2017. "Impacts of Monetary Policy on Commercial Banks’ Profits: The Case of Vietnam," Asian Social Science, Canadian Center of Science and Education, vol. 13(8), pages 1-32, August.
    • Handle: RePEc:ibn:assjnl:v:13:y:2017:i:8:p:32
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    References listed on IDEAS

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    1. Demirguc, Asli & Huizinga, Harry, 1999. "Determinants of Commercial Bank Interest Margins and Profitability: Some International Evidence," The World Bank Economic Review, World Bank, vol. 13(2), pages 379-408, May.
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    3. Stephan Kohns, 2017. "Monetary Policy and Financial Stability," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 15(1), pages 17-18, 04.
    4. Claudio Borio & Leonardo Gambacorta & Boris Hofmann, 2017. "The influence of monetary policy on bank profitability," International Finance, Wiley Blackwell, vol. 20(1), pages 48-63, March.
    5. Frederic Lambert & Mr. Kenichi Ueda, 2014. "The Effects of Unconventional Monetary Policies on Bank Soundness," IMF Working Papers 2014/152, International Monetary Fund.
    6. Stephan Kohns, 2017. "Monetary Policy and Financial Stability," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 15(01), pages 17-18, April.
    7. William B English, 2002. "Interest rate risk and bank net interest margins," BIS Quarterly Review, Bank for International Settlements, December.
    8. Albertazzi, Ugo & Gambacorta, Leonardo, 2009. "Bank profitability and the business cycle," Journal of Financial Stability, Elsevier, vol. 5(4), pages 393-409, December.
    9. repec:ces:ifodic:v:15:y:2017:i:1:p:19307486 is not listed on IDEAS
    10. Alex Ehimare Omankhanlen, 2014. "The Effect of Monetary Policy on the Nigerian Deposit Money Bank System," International Journal of Sustainable Economies Management (IJSEM), IGI Global, vol. 3(1), pages 39-52, January.
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    1. repec:bcp:journl:v:9:y:2022:i:11:p:40-45 is not listed on IDEAS

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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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