Does monetary policy still affect consumption? Time-varying transmission of credit and interest rates in Vietnam

Chiu  Meng-Hsiang; Vu Tuan Anh

doi:10.63065/ajafe.2026.1.2.005

Asian Journal of Applied Financial Econometrics (AJAFE)

Volume 1_Number 2 , Tháng 8/2026, Trang 64-79

Does monetary policy still affect consumption? Time-varying transmission of credit and interest rates in Vietnam

Chiu Meng-Hsiang, Vu Tuan Anh

DOI: 10.63065/ajafe.2026.1.2.005

Ngày nhận bài: 30/06/2026

Ngày nhận bài sửa: 12/08/2026

Ngày duyệt đăng: 18/08/2026

Email: anhvt@hub.edu.vn

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Tóm tắt

Purpose – This study assesses whether monetary policy still affects household consumption in Vietnam; it also assesses the relative contribution of credit and interest-rate shocks (in reduced form) and quantifies how the volatility of consumption’s own shocks evolves over time.

Design/methodology/approach – The study estimates a Bayesian time-varying parameter vector autoregression with stochastic volatility (TVP-VAR-SV) using monthly data from 2013M4 to 2025M12 with four endogenous variables. Dynamic effects are analysed through impulse response functions (IRF), forecast error variance decomposition (FEVD), and the stochastic volatility (SV) of the consumption shock, together with robustness checks. The dataset comprises 153 monthly observations (2013M4–2025M12); retail sales and credit are drawn from FiinPro-X, the refinancing rate from the State Bank of Vietnam, and the CPI from the IMF's IFS.

Findings – The transmission of monetary policy to consumption is weak: consumption responses to both credit and interest-rate shocks are largely statistically insignificant, and neither channel dominates persistently. The most robust finding is that the magnitude of consumption shocks varies markedly over time, with a high-volatility cluster persisting throughout 2020–2023, peaking in September 2022 at roughly eight to eleven times the normal-period level. These findings are consistent across alternative specifications.

Originality/value – This study is the first to assess the time-varying response of Vietnamese household consumption to monetary shocks using monthly retail-sales data. It traces how the relative importance of the credit and interest-rate channels shifts across different states of the economy; through the stochastic-volatility component, it separately quantifies the volatility of consumption’s own shocks, distinct from changes in the transmission mechanism; and it extends the TVP-VAR-SV framework – so far applied in Vietnam mainly to financial variables – to the transmission of monetary policy to consumption.

Từ khóa

Monetary policy transmission, Household consumption, TVP-VAR-SV, Stochastic volatility, Credit channel, Vietnam.

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