Applied Econometrics and International Development Vol.9-1 (2009) VAR ANALYSIS OF THE MONETARY TRANSMISSION MECHANISM IN

Understanding the monetary transmission mechanism is crucial to central bankers. We analyze the monetary transmission mechanism in Vietnam, using the vector autoregression approach (VAR) and focusing on the reduced-form relationships between money, real output, price level, real interest rate, real exchange rate and credit. We find consistent evidence that monetary policy can affect real output. Surprisingly, the connection between money and inflation is less clear in the Vietnam case. As for the transmission mechanism, the credit and exchange rate channels are more important than the interest rate channel