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Research Paper | Economics & Finance | Vietnam | Volume 9 Issue 7, July 2020

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

Mai Thi Phuong Thuy

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.

Keywords: monetary policy, insolvency risk, System GMM method

Edition: Volume 9 Issue 7, July 2020,

Pages: 796 - 800