MINISTRY OF EDUCATION STATE BANK OF VIETNAM
BANKING UNIVERSITY HO CHI MINH CITY
NGUYEN TRAN XUAN LINH
THE IMPACT OF MONETARY POLICY AND
MACROPRUDENTIAL POLICY ON
FINANCIAL STABILITY: THE CASE OF EMERGING
AND GROWTH-LEADING ECONOMIES
DOCTOR OF PHILOSOPHY IN ECONOMICS
THESIS SUMMARY
HO CHI MINH CITY - 2021
MINISTRY OF EDUCATION STATE BANK OF VIETNAM
BANKING UNIVERSITY HO CHI MINH CITY
NGUYEN TRAN XUAN LINH
THE IMPACT OF MONETARY POLICY AND
MACROPRUDENTIAL POLICY ON
FINANCIAL STABILITY: THE CASE OF EMERGING
AND GROWTH-LEADING ECONOMIES
DOCTOR OF PHILOSOPHY IN ECONOMICS
THESIS SUMMARY
Major: Finance – Banking
Code: 9.34.02.01
Scientific instructor: Assoc. Prof., Dr. Nguyen Ngoc Thach
HO CHI MINH CITY - 2021
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CHAPTER 1:
BACKGROUND OF THE STUDY
1.1 The urgency of the thesis
The global financial crisis that began in 2008 has revived controversy about
monitoring the operations of banking and other financial institutions to ensure financial
stability. At the heart of this problem is acknowledging that the regulations governing
the financial system are mostly overly focused on the risks of specific credit institutions
rather than the entire system financial system (Freixas et al., 2016). Supervisory
regulations were established before the crisis with the expectation that it would create a
buffer to absorb shocks for each specific credit institution; Thus, the whole financial
system would become safer. The 2008 crisis, however, showed that these regulations
were inadequate. In order to control the risks that can destroy financial stability with
negative effects on the real economy, traditional policies such as fiscal and monetary
policies are not enough. There must be management and supervision of the financial
system as a whole and its relevance to the entire economy through the implementation
of macroprudential policy (Freixas et al., 2016).
According to Freixas et al (2016), the term "Macroprudential policy" has been
mentioned by researchers since the late 1970s when loan growth for developing
countries increased rapidly. But despite the great interest of policymakers, central banks
and researchers, the meaning of the phrase “Macroprudential policy” remains
ambiguous (Clement, 2010; Laeven and Valencia, 2010). Besides, the interaction
between monetary policy and macroprudential policy is a key issue for financial
stability, but studies on this topic are still relatively few and research results are not
consensus especially the measurement method and variable represent for Financial
Stability (Adrian and Liang, 2018).
For this reason, the author decided to choose the topic "The impact of monetary
policy and macroprudential policy on financial stability: The case of Emerging and
growth-leading economies (EAGLEs)" as a doctoral thesis with the desire to systematize
the concepts of Macroprudential Policy and Financial Stability, propose a tool suitable
to the practice of EAGLEs countries to measuring the health of a financial system of
these countries, see examine the impact of monetary policy and macroprudential policy
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on financial stability in EAGLEs countries. From these analyzes, the author will propose
policy recommendations towards financial stability for the countries of the EAGLEs
group.
1.2. The research gap
Firstly, the financial stability scales are either too large to collect data and too
complex to interpret, or not suitable for the particularities of the EAGLEs.
Secondly, studies on the impact of monetary policy and macroprudential policy on
financial stability have only analyzed a few aspects of the financial system such as credit
cycle, credit growth, asset price growth, it does not fully reflect all aspects of the
financial system, therefore, the proposed solution focusing on only a few areas of the
financial system that may result in biased.
Finally, the current studies often are conducted by the frequentist approach, but
this method has the disadvantage that the sample size must be large; hence researchers
usually analyze a group of countries. Each country in the group has the unique
characteristics of the financial system; however, it is difficult to cover all of the intrinsic
characteristics of each country in the group by analyzing only one group as a whole.
1.3. Research objective
The overall objective of the thesis is to evaluate the impact of monetary and
macroprudential policies on financial stability in the group of EAGLEs and each specific
country in the group of EAGLEs. The research results are the scientific ideas to propose
policy implications to help strengthen the financial system's stability, thereby improving
the macroeconomic environment towards sustainable economic growth.
To achieve the overall goal, the thesis resolve the specific objectives:
- Proposing a set of indicators to measure financial stability suitable to the
characteristics of the financial system in the countries of the EAGLEs group.
- Evaluate the impact of monetary policy and macroprudential policy on
financial stability in EAGLEs and each specific country in the group of
EAGLEs.
- Proposing some policy implications for monetary policy and macroprudential
policy to improve the financial stability of countries in EAGLEs.
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1.4. Research question
To achieve the research objectives, the thesis answer the following questions:
- What are the most common indicators measuring financial stability? Which
method is appropriate and what needs to be adjusted to proper the existing
conditions in the EAGLEs countries?
- How do monetary policy and macroprudential policy affect the financial
stability index of EAGLEs and countries in the EAGLEs?
- What measures should be taken to improve the financial stability of EAGLEs?
1.5. The object and scope of the study
The object of the study:
The research object of the thesis is Financial stability; and the impact of
macroprudential and monetary policies on financial stability in Emerging and growth-
leading economies (EAGLEs).
The scope of the study:
Research conducted in Emerging and growth-leading economies.
Duration of the study:
The thesis investigates the impact of monetary policy and macroprudential policy
in countries belonging to the EAGLEs group in 2008 - 2018.
1.6. Research methods
In order to achieve the research goal of exploring the impact of monetary policy
and macroprudential policy in the EAGLEs countries, the thesis combines qualitative
and quantitative methods according to the Bayesian approach to solve research
problems.
1.7. Research data
Research data is secondary data collected from reliable sources such as the World
Bank (WB), International Monetary Fund (IMF), Center for Economic Studies and Ifo
Institute (CESifo), Macroeconomic database of Oxford economics, and Eugenio dataset
(2018).
1.8. The result of research and contributions of the thesis
The result of research
