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The Impact of Monetary Policy on Insolvency Risk at Vietnamese Commercial Banks

Journal: International Journal of Science and Research (IJSR) (Vol.9, No. 7)

Publication Date:

Authors : ;

Page : 796-800

Keywords : monetary policy; insolvency risk; System GMM method;

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Abstract

The study assesses the impact of monetary policy on Vietnamese commercial banks' insolvency risk during the 2008-2017 period, with balanced panel data for 30 commercial banks in Vietnam. Results from the study show that an increase in the M2 money supply creates an increase in the Z index, which means a reduction in the risk of insolvency. The expansionary monetary policy increases real estate prices, collateral value, and bank capital, resulting in higher asset value for the bank. As a result, both deposit growth and credit growth in the economy have positive signs; therefore, the activity of commercial banks results in efficiency and improved profit, reducing the risk of insolvency. This result is consistent with the Borio and Zhu (2012) reports.

Last modified: 2021-06-28 17:09:23