Transfer Money Policy through Credit Channels in Vietnam

Study and examines the impact of monetary policy transmission through credit channels in Vietnam based on the research model of Sun et al. (2010). To estimate this model system, the author uses VECM method with secondary data taken from reliable sources on the situation of Vietnam consumer price index, credit growth of the economy, deposits of customers, industrial production in Vietnam, growth of M2 money supply, rediscount interest rate; VN Index from January 2008 to December 2017. The research results show that both in the short and long-term, the rediscount rate has a negative impact on the credit growth of the economy. When the State Bank of Vietnam implements an expansionary monetary policy with a discounted interest rate tool, it will have an impact on increasing the total credit supply of the economy. However, an increase in economic credit will increase economic output (represented by Vietnam’s industrial production value) in the short term; or the impact of monetary policy transmission via credit channel in Vietnam shows that there exists a short-term credit channel but does not exist in the long term.


INTRODUCTION
Monetary policy transmission is one of the important research issues in the study of monetary policy that researchers are interested in the world for long time by two reasons. First, grasping the level of monetary policy impact on the economy plays an important role in evaluating the governance direction of the Central Bank. The effectiveness of an easing monetary policy is not guaranteed even if the central bank lowers the operating interest rate when the impact of monetary policy on the economy is not as expected. Secondly, before making any choice and using any monetary policy tool, the central bank needs to accurately assess the time and extent of its impact on the system of credit institutions and the economy. To do this, the central bank needs to understand the mechanism of monetary policy transmission to the financial situation of the credit system as well as macro variables in the economy such as output and inflation. Currently, economists have very different views on this issue, because in the conditions or the level of development of different financial markets, the impact of monetary policy on the economy through the channels is not the same.
Through open market instruments, compulsory reserve instruments, interest rate instruments, etc., monetary policy affects the economy through various channels such as interest rates, exchange rates, credit, asset prices … (Chatelain et al., 2003). There are many views that interest rate channel is the main transmission channel (Baglioni, 2007). However, from Bernanke and and Blinder point of view (Bernanke, 1990), monetary policy appears to be ineffective in reducing medium and long-term interest rates, especially real interest rates (playing an important role in decisions intend to invest in long-term assets. Meanwhile, the credit channel may represent a group of factors that amplify and spread the impact of monetary policy on Macro variables in developing countries (Disyatat and Vongsinsirikul, 2003). Therefore, the assessment of the transmission impact of monetary policy through credit channel This Journal is licensed under a Creative Commons Attribution 4.0 International License also plays an important role in evaluating the management of monetary policy in the economy. Theories show that the macro objectives of the economy including price stability, economic growth promotion, creating jobs to reduce unemployment rates are greatly influenced by the volume and credit structure supplied on the market. Through the mechanism of impact on commercial banks because policy instruments will change the list of credit, interest rates, borrowing conditions … of commercial banks, it is possible to adjust the expansion or narrowing of credit structure by economic sector or by region. On the one hand the expansion or narrowing of credit affects the amount of money supplied and interest rates on the market and therefore affects the prices in the economy. On the other hand, the expansion or narrowing of credit, the reduction or increase of interest rates, the change in credit structure will affect the scale of investment and thus affect the output, employment and economic structure.

Theoretical Basis
In theory, Bernanke and Blinder (1988) demonstrate the change of bank credit supply before currency through LM shift. The study argues that when the central bank tightens monetary policy by selling securities on the open market, it will reduce the reserve and deposits of the credit system, the LM shift to the left leads to money supply in a declining economy. Since the issuance of debt and the stock instruments to offset the reduction of deposits is not easy, the ability of credit institutions to provide loans decreases when the Central Bank tightens monetary policy, supply credit is declining. In previous studies: Bernanke and Gertler (1995); Gertler and Gilchrist (1993); Kashyap and Stein (1994) have developed more details based on more detailed studies conducted by Bernanke and Blinder (1988) in order to provide theoretical models that explain changes in credit supply in the monetary regulation mechanism and thereby affect the economy's output. Studies show that the important and popular impact of monetary policy through commercial bank credit channel is shown in two aspects: through bank credit activities and through the adjustment of the balance sheet of customers.
Firstly, affecting bank credit supply According to Bernanke and Gertler (1995), when the central bank tightened monetary policy, commercial banks 'funds were reduced, commercial banks had to cut credit supply and vice versa. The tightening of monetary policy reduces deposits along with the decrease in assets of commercial banks.
Secondly, the process of adjusting customer balance sheet: Bernanke and Blinder analyze the impact of monetary policy on bank credit through account balance or net asset value of customers. The implementation of the central bank's monetary policy will change the net asset value on the balance sheet of enterprises, which leads to the opposite choice and moral risks and affects the bank's decision on the amount of credit supply. It is possible to generalize the influence of monetary policy on the changes in net assets of enterprises in three directions: • Through net asset value. M↑→ Net asset value↑→ Opposite selection↓ and moral hazard↓→ credit↑→ I↑→ Y↑. • Affecting the market value of assets used as collateral for loans. Decreasing interest rates due to the expansion of monetary policy will increase the market value of collateral assets, reduce interest rate risks for enterprises, and improve the financial status of enterprises, businesses can access capital of banks more easily and therefore the amount of credit increases will increase aggregate demand. • Through cash flow value.
For M is the money supply, i is interest rate, P* is the net asset value, I is the investment, Y is the total output, P is the unintended price. The impact of monetary policy through credit channel through these two impacts will be greater if two conditions are met: (1) The Central bank can greatly affect the credit provision of commercial banks: In this case, when central banks tighten money supply, commercial banks have no assets, cannot or have difficulties in issuing debt instruments or capital in the market to raise capital to compensate for the decline in the money supply for loans to customers as a perfect replacement. When monetary policy tightens, if banks are unable to fully meet the demand for funds only by using asset reductions to raise capital through issuing debt instruments or capital in the market. In this case, cutting bank credit is a measure to replace the storage of funds when monetary policy tightens, and reduces bank asset types (including loan's profits).
(2) Customers with other financial resources to replace bank loans, businesses (and individuals) have perfect replacements for loans at banks. In other words, they can make up for these loans by borrowing directly from saving people who have idle capital on the capital markets. In this case, customers appear to be sensitive about prices before the main currency shock and quickly switch to alternative forms of capital mobilization, reducing the demand for loans in the market, the credit channel will be dropped.

Empirical Evidence
In terms of research methods, in general, most studies on the impact of monetary policy through credit channel use the approach of model VAR, SVAR, VECM, GMM with national production variables, inflation index, credit interest rate, credit channel, actual effective exchange rate, foreign exchange reserves and stock market index. Studies on policy transmission channels frequently use VAR, SVAR, VECM models because the relationship between variables does not go one way, but in many cases, the opposite direction can also occur. For empirical research on monetary policy transmission in Vietnam, the use of these models is entirely consistent with the general research trend. However, with quantitative research, it is necessary to update to have more reliable results, while domestic studies do not explain the model structure clearly.
In terms of research results, research in the world has two results: Afrin (2017)

Research models
In empirical research, choosing the right model is one of the most difficult jobs. The theory of function form does not give a simple answer to this problem. By examining relevant studies, we see empirical studies on the relationship between bank debt and housing prices often using self-regression vector models (VAR) and error correction model (ECM) because these models are suitable for time series data. Therefore, this study uses the ECM developed by Hofmann (2004). Specifically, the ECM has the form: To consider the impact of transmission of monetary policy through credit channels in Vietnam, studied modeling VECM based on your research model of Sun et al. (2010), master model as follows: Inside, MT t is the vector indices measure monetary policy in Vietnam, including interest rates interbank Vietnam's growth rate of monetary supply M2, V t is the vector of variables total deposits from customers at banks, total customer bank credit stock index, industrial output, consumer price index, u t MT represent monetary policy shocks, u t V are the macro shocks of the economy.

Method of estimation
To estimate the model system (1), the author uses the VECM method. This is essentially the VAR method that has been corrected by the ECM method. The VECM method is only used when the string strain is tested to have integration phenomenon that is in the long term, they will balance, from which we overcome the disadvantages of the VAR method, that the VAR method they consider to be in short-tern missed loss of long -term factors.
According to Engle and Granger (1987); Johansen (1988) the estimation of ECM models can be conducted in two steps: • Step1: Verification of technical co-integration (Johansen, 1988) Test results if there exists at least one co-integration relationship between the variables, that means there is a longterm equilibrium relationship between the relevant variables, then continue to step two.
Co-integrated regression equation (expressing a long-term equilibrium relationship between variables), The ECT co-integration vector is measured by the residual changes from the above regression equation as follows: Inside: Y t : Is the dependent variable X t : Are independent variables in the model ECT t : Is the remainder in the model α β ,� t : Is the coefficient of the equivalent matrix in size m: Is the number of independent variables. • Step 2: estimate the ECM model If the results conclude that there exists a co-integration relationship between the variables in the model or the long equilibrium relationship in existence, the ECM model is estimated as follows:

Tests and Estimates
The processing of variables in the time series model can be summarized briefly, this study will do as follows: • Test the stop of the time series of variables in the model by Unit Root Test unit testing • Determine the integration order of the variables to have a stop data sequence • Select the optimal delay of the model based on the VAR self-regression vector model and inspection standards such as Akaike Information Criterion, Hannan -Quinn criteria, SC

(or BIC), Final Prediction Error (FPE) criteria) • Perform co-integration tests (Integrations test) based on the
Johansen Integrations test method to determine whether there is a long-term relationship between the variables in the model • After co-integration testing, the study will determine the long-term relationship between the variables in the model and thereby determine the short-term relationship based on the ECM.

Research Data
Research based on secondary data sources. Specifically, time series data about:  Table 1 shows the results of unit root tests for variables in the Augmented Dickey-Fuller (ADF) standard.

Testing on Unit Tests
The result of unit root test according to ADF standard shows that some variables in the original string are non-stop. However, when taking first differences 1, The CPI t , CRE t , DEP t , IPI t , M2 t , R t , VNI t are stopped at the 1%. Therefore, the variables will be used in the

Select the Optimal Delay in the Model
There are many methods to select the latency for the VECM model. The study presented the lag Order Selection Criteria method to find the appropriate delay for VECM model. The results are presented in Table 2.
After determining the optimal delay in the model is 1. Next author will examine the existence of long-term equilibrium relationship between the variables in the model. To do this, the author examined the existence of a co-integration relationship between the variables in the model according to the Johansen method.   The P-value in Table 3 shows that there are 4 co-integration relationships between the variables in the model at the 5% significance level. Thus, there is evidence of existence of a long-term equilibrium relationship between changing consumer price index, changing total customer deposits changing M2 money supply, changing the discount interest rate, changes in stock price index, growth of bank loans, economic growth.

Results of Estimating VECM Model
After finding evidence of the existence of a long-term equilibrium relationship between the variables in the model, next the author conducted the estimation of VECM model with 4 integrated relations and the optimal delay is 1.  Table 4.
The estimated results of the VECM model show that the regression coefficients C(14) of the integrated equations have negative values(−0.559002) and have P < 5% significance level so this regression coefficient is statistically significant. Thus, in the long term there exists an impact between the credit growth of the economy, the discount rate, M2 money supply and the stock price index.
On the other hand, the regression coefficient C (22) of the rediscount interest rate variable is -0.001049which has a negative value and has a P = 0.0584 which <10% significance level. Thus, in the short term when the State Bank implements an expansionary monetary policy through the increase of interest rate rediscount tools, there will be an impact on reducing the credit growth of the economy.
Thus, the research results show that both in the short and long term, the discount rate has a negative impact on the credit growth of the economy.
The testing of the stability of the model, the normal distribution, the autocorrelation, the variance of variance have been tested by the author. The results of these tests show that the obtained model satisfies the conditions.
Next, the equation estimation result with dependent variable D(IPI) is as follows in Table 5.
The estimation of the VECM model shows that the regression coefficient C(40) of the cointegrated equation is negative (−0.078868) and has a P < 5% significance level so this coefficient regression is statistically significant. Thus, in the long term there exists an impact between Vietnam's industrial production growth, discount interest rates, M2 money supply and stock price index. Thus, credit growth does not affect the value of Vietnam's industrial production in the long term.
On the other hand, the regression coefficients C (42) of the rediscount interest rate variable is 3.573246 which has a negative   value and has a P = 0.0026 <1% significance level indicating in the short term when the economy credit increase will lead to increase the value of Vietnam's industrial production, increase economic output.
Thus, the estimated results by VECM model to check the impact of monetary transmission via credit channel in Vietnam show that there is a short -term credit channel but does not exist in the long term.

Testing Granger Causality
To clarify the direction of impact as well as the transmission between variables in the model. The author continues to perform Granger causality test with an optimal delay of 3. The test results are as follows in Table 6.
Granger causality test results from rediscount rate to credit growth with P = 0.0557 are <10% significance level. Thus, the discount rate has an impact on credit growth. However, the Granger causality test results from a credit growth to a discount rate with a P = 0.6392 are >10% significance level. Thus, credit growth has no opposite effect on the discount rate.
In addition, the Granger causality test results from credit growth to economic growth with P = 0.0020 are smaller than the 1% significance level. Thus, credit growth has an impact on economic growth. However, the results of causality test also showed that there was no opposite effect from economic growth to credit growth.
Thus, there is no causal relationship between rediscount interest rates and the credit growth of the economy, between these two variables, there is only one-way relationship from the discount interest rate to the credit growth economy.

CONCLUSIONS AND POLICY IMPLICATIONS
Monetary policy has always been one of the one of the key policies in promoting economic growth. To be effective for the economy, the impact of monetary policy is often through transmission channels such as interest rate channel, exchange rate channel, asset price channel, credit channel … The purpose of this research is to consider the effectiveness of transmission of monetary policy through credit channel in Vietnam from January 2008 to December 2017. By using the VECM model, the research results show that both in the short and long term, the discount interest rate has a negative impact on the credit growth of the economy. Thus, when the State Bank implements an expansionary monetary policy through the increase of interest rate rediscounting tools, it will have an impact on reducing the credit growth of the economy. However, an increase in the credit of the economy will increase the value of Vietnam's industrial production, increase the economic output in the short-term. Therefore, the impact of monetary policy transmission via credit channel in Vietnam shows that there is a short-term credit channel but does not exist in the long term. However, Granger causality test results show that credit growth has no opposite effect on discount interest rates.
In addition, the Granger causality test results from credit growth to economic growth show that credit growth has an impact on economic growth. However, the results of causality test also showed that there was no opposite effect from economic growth to credit growth.