Thực sinh viên ấp ủ muốn viết mẻ, thú vị sau năm nghiền ngẫm sách trường Nhưng vấn đề để anh chị trước không viết đề tài khơng có số liệu Thời gian tới em thực tập Hơn nữa, em lại phải viết tiếng Anh luận dài 60 trang thách thức lớn Nếu chấm đánh giá cao mà đề tài cũ cách viết (hihi khó đòi hỏi người viết phải có khả tổng hợp viết lại file đính kèm), viết đề tài nhỏ thơi có áp dụng lý thuyết vào nghiên cứu (ví dụ trước có sv làm đề tài thẻ NH, bạn tiến hành survey nhỏ phân tích số liệu tự thu thập được) Làm cơng, chưa xác quy mơ mẫu nhỏ đánh giá cao nỗ lực bạn bây h nhiều sinh viên thường copy sv khóa trước nộp cho giáo viên :-(( Positive changes in conducting the monetary policy in Vietnam Introduction Monetary policy is an important policy conducted by the central bank to control the money supply in an economy (Nguyen, 2002: 238) Following this, economic targets like controlling inflation and decreasing unemployment rate may be achieved based on the effectiveness of the monetary policy’s tools Central banks in developing countries, including Vietnam, are usually in favor of using direct instruments in conducting the monetary policy The term “direct” is defined that the central bank controls the money supply directly by its regulatory powers (Alexander et al, 1996) However, in the period from 1999 to the present, Vietnam’s monetary policy has been changed actively with the rudimentary development of indirect instruments It means that Vietnam’s Central Bank has begun using its influence on the money market conditions as the issuer of reserve money (Alexander et al, 1996) For the last five years, Vietnam’s Central Bank has operated indirect instruments because direct instruments have become increasingly ineffective in an open economic environment Three main types of indirect instruments used by the central bank are open market operations, reserve requirement and refinancing facilities Briefly, open market operations are the central bank’s purchase or sale of securities like central bank bills and treasury bills It will lead to an expansion or contraction of reserve and deposits in the banking system and hence to an increase or a decline in the money supply Besides, reserve requirement obliges commercial banks to hold a specific rate of their borrowing money at the central bank A rise or reduction in reserve requirement means that banks must hold more or less reserve, and the money supply reduces or increases Finally, refinancing facilities are the credit channels of the central bank to the banking system by buying or selling financial assets under rediscount rates A high rediscount rate can be set to discourage commercial banks to take loans from the central bank, thus money supply will be controlled decreasingly; and vice versa for a low rediscount rate (Mishkin, 1992:546) Although Vietnam’s Central Bank is taking the first step to operate these instruments and needs more time to confirm the effectiveness, this paper appreciates the beginning successes of Vietnam’s Central Bank and discusses some limitations in conducting the monetary policy indirectly, then some solutions are suggested in conclusion Open market operation The open market operation is the most important tool of the monetary policy because of its decisive influence in changes of the monetary base and the monetary supply (Mishkin, 1992: 562) A purchase of financial assets will increase the monetary base, and hence the monetary supply, and vice versa, a selling will decrease the monetary base by reducing the monetary supply The open market operation is better than others tools by the following aspects: - It can control the entire volume transacted, while refinancing facilities can only stimulate or discourage banks’ borrowing decision - It can be conducted in a very flexible and precise manner to obtain any volume This is achieved by increase or decrease the number of assets to be sold - It is easily to be reversed When the monetary supply rises higher than expected, the trend can be moved backward immediately by selling securities - It can take place rapidly without any delay caused by administration procedures In order to change the monetary base, an order will be sent to security traders, and the operation will by conducted right away Since officially beginning operation in July 2000, Vietnam’s open market has played the role of controlling the money supply with the increase in number of participants and amount of transactions The number of member at first is 12 banks and financial institutions which mostly belong to the state sector (Vietnam’s State Bank, 2000) But now the member number has increased to 22 including state commercial banks, shared commercial banks, joint venture banks, branches of foreign banks and one financial company (Vietnam’s State Bank, 2002) The members of the open market have developed not only in number but also in the type of participant In addition, the transaction amount in the open market has risen dramatically from the year 2000 to the first quarter of 2003 Based on the annual reports of the Central Bank, the following table points out the values of transaction in the following years seem to be bigger three times than the previous years Table: Transaction Revenue on the Open Market Unit: VND billion The total value of central bank’s 2000 1,903.5 2001 3,933.8 2002 9,145.5 1st Q/2003 9,734 purchase and sale Source: Annual report of Vietnam’s State Bank (2000, 2001, 2002) Report of Vietnam’s State Bank (2003) The facts prove that the open market in Vietnam is become more familiar with banks and financial institutions and will be an important tool of the monetary policy Besides the good results, open market operations have some facing limitation, typically, in the kind of goods and the permanent attendance of members Even the State Bank Law permits the wide range of financial assets including short-term and long-term securities to be transacted (Vietnam’s State Bank, 1996: article 20), the goods mostly used in the market are only Treasury bills It is an obvious obstacle for the open market because the market cannot operate continuously without the variety of goods Moreover, the number of members actually participating in the market is just 30 % of the total registered members (Vietnam’s State Bank, 2003) Banks and financial institutions are not ready to attend the market when they have not considered the open market as their benefit market Undergoing these limitations, open market operations need more improvement to become the effective instrument of the monetary policy Reserve requirement A change in reserve requirement affects the monetary supply by causing a change in the monetary multiplier (Mishkin, 1992: 564) For example, an increase in reserve requirement from 5% to 10% will decrease the monetary multiplier from 20 to 10 Thus, the monetary supply will drop accordingly The reserve requirement is a very powerful tool of the monetary policy, which can cause a change by a great amount of money simply by a small change in the reserve requirement (for example 0.5%) In addition, it can influence all banks equally, because the requirement is imposed in all banks without any exception After years of not using reserve requirement as a monetary policy’s instrument, reserve requirement has now been coordinating with other tools to conduct monetary policy The situation in 1999 showed that it was the first time Vietnam’s Central Bank adjusted its reserve requirement following the interest rate (Mai, 2001) It means that the Central Bank did not continue keeping their fixed rate of reserve requirement When the monetary policy followed the period of expansion in 2000 (World Bank, 2001), the reserve requirement was decreased at the same time with the reduction of interest rate policy, thus permitting banks and financial institutions to keep smaller amount of reserve and provide more money to the economy The cooperation between interest rates and reserve requirement is the first signal of positive change in implementing the reserve requirement instrument At the present time, when the interest rate has no longer to be controlled, the Central Bank has used a reserve requirement closely influenced by the inflation rate It is shown that reserve requirement usually adjust increasingly in the period of high inflation rates and decreasingly when the inflation rates are low Although the Central Bank acknowledges the influence of the reserve requirement to the money supply, the reserve requirement has not been implemented in an active way (Vuong, 2003) Usually, the adjustment of reserve requirement is based on the change of the other signals like interest rate or inflation rate It is resulted from the fact that Vietnam’s banking system has not yet become a major channel of payment in the economy because Vietnamese people still maintain the practice at using cash in payment Without a strong banking system, this instrument cannot quickly and broadly affect the money supply So, the change of the money supply is not much influenced by the adjustment of reserve rate in the banking system; the reserve requirement instrument has a little effect to the money supply as a whole Therefore, the reserve requirement, itself, cannot be an independent instrument to increase or decrease the money supply; it is only the supporting instrument to other ones Moreover, the reserve requirement is presently applied to deposits with maturities ranging from one day to two years aiming at protecting banks from liquidation risk (Dang, 2003) The risk itself, however, mostly falls into the demand deposit Depositors can withdraw their money at any time in principle, but they not usually that as choosing term deposit instead of demand deposit Apart from that, money flows into the banks everyday from new depositors Therefore, the state bank should be more flexible while deciding the categories of deposits, to which the reserve requirement should apply For instance, in order to increase the monetary supply, the state bank can ask for reserve from deposits with less-than-3 months to less-than months maturity, instead of adjusting the reserve requirement rate Refinancing facilities The refinancing facilities, in which discount rate holds a key role, affects the monetary supply through changes in the discount volume and the monetary base A rise in the discount volume (a downward movement in the discount rate) will be added to the monetary base and accelerate the monetary supply, and vice versa (Mishkin, 1992: 568) The refinancing instrument in Vietnam has now really been improved by an independent rediscount rate In the past, the rediscount rate of the Central Bank depended on each refinancing loan (Mai, 2001), so its function as an instrument of monetary policy was weaker because the Central Bank could not control all the rediscount rates without the bondage of the loan’s interest rate Now, the Central Bank stipulates a unique rediscount rate actively following the aim of the monetary policy In fact, in the period of 1999-2001, the Central Bank raised the rediscount rate continuously in order to expand the money supply Besides, refinancing facilities help the Central Bank become the final lender to banks and financial institutions Therefore, on the one hand, the banks and financial institutions can be protected from their financial crisis; on the other hand, the central bank plays a more significant role of managing the banking system However, the Vietnam’s Central Bank now is confused in deciding a reasonable rediscount rate and the refinancing facilities instrument seems not to cooperate with the open market properly (Nguyen, 2002) Because the refinancing instrument has a certain impact on the open market operation, the presently low rediscount rate may lead to the ineffective operation of the open market In this case, banks and financial institutions are likely to borrow the money from the Central Bank and use this money to buy securities in the open market As a result, the Central Bank spends its money on buying its own securities So, the instruments of the monetary policy become less effective It requires the rediscount rate to be considered more carefully in the time of adjustment For example, the rate could be approximately equal that of short-term financial assets or short-term deposit Conclusion With the development of the open economy, Vietnam’s Central Bank is now gradually replacing the monetary policy’s direct instruments by the indirect ones At the beginning, Vietnam’s Central Bank had experienced some remarkable successes The open market has enlarged in the number of members and in the amount of transactions The reserve requirement escaped from the fixed rate to the flexible rate in cooperation with other tools Refinancing facilities have improved to become an independent instrument and actively influenced to the money supply These positive changes show that the trend transferring from the direct to indirect instruments is the right way for Vietnam’s monetary policy It is required that the Central Bank should find solutions to overcome the limitations and to strengthen the effectiveness of the instruments Particularly, the Central Bank should diversify the open market’s goods that are not only limited by the treasury bills, but also the other financial securities like commercial bank bills, state bank bills, certificate deposit notes, etc Besides, banks and financial institutions should be more aware of the importance of the open market as their efficient credit channel In terms of refinancing facilities, a reasonable rediscount rate has to be stipulated more carefully in comparison with the interest rate of securities in the open market Finally, the reserve requirement instrument is closely linked to the development of the banking system Vietnamese people should know how useful and comfortable the services of the banking system are; they should use these services permanently At that time, the banking system can control mainly the money supply and the reserve requirement may become an independent instrument of the monetary policy In brief, Vietnamese trends in conducting the monetary policy are confirmed by the positive results of the indirect instruments However, Vietnam’s Central Bank needs more time and efforts of itself, of each commercial bank and financial institution, and of each person to contribute to the effectiveness of the monetary policy Reference Dang H T (2003) Bàn công cụ sách tiền tệ giai đoạn Tạp chí Thị trờng Tài - Tiền tệ No 13 Alexander W E., Balino T., and Enoch C (1996) Adopting Indirect Instruments of Monetary Policy Finance & Development March, pp14-16 Mai H A (2001) VỊ viƯc sư dơng c¸c công cụ điều hành sách tiền tệ Tạp chí Ngân hàng.No 6, pp11-14 Mishkin F S., (1992) The Economics of Money, Banking, and Financial Markets New York: Harper Collins Nguyen H T (2002) Giáo trình lý thuyết tài 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