This thesis presents four self-contained empirical research
papers on monetary policy and monetary transmission using vector
autoregression (VAR), structural VAR (SVAR), and Bayesian
time-varying parameter VAR (TVP-VAR) models. The first two papers
compare aspects of monetary policy and transmission in selected
developed countries: Australia, the US, and the Euro area
(Chapter 3); and Australia, the US, UK, and Canada (Chapter 4).
The last two papers (Chapters 5 and 6) explore monetary policy
and effects of monetary policy on inflation in Vietnam – a
transition developing country.
The empirical results indicate that the investment channel of
monetary policy transmission plays a more important role than the
consumption channel in Australia. Meanwhile the investment
channel and the consumption channel make similar contributions to
the overall transmission of monetary policy in the Euro area and
the US. The difference between Australia and the Euro area
appears to come from differences in housing investment responses,
whereas Australia differs from the US mainly because it has a
lower share of household consumption in total demand.
Results from TVP-VAR models suggest that there were comovements
in the monetary policy reactions to unemployment across countries
before the recent Global Financial Crisis (GFC). The policy rate
seems to react more strongly to unemployment changes in more
recent years, especially in the US and UK. Monetary policy
responses to inflation/deflation are observed to be divided into
two groups, with the responses in the US and UK showing a
different pattern to the responses in Canada and Australia.
Monetary policy seems to react most aggressively against
inflation/deflation in the US. The effects of monetary policy
shocks on unemployment and inflation are similar across
countries, and seem to have weakened over time.
Results also suggest that monetary policy transmission to
inflation in a transition country like Vietnam appears to work in
a similar way to as in developed countries. The impulse response
functions of inflation to shocks in monetary policy are plausible
and robust across the VAR and SVAR models. The policy interest
rate plays an important role in affecting inflation. For the case
of Vietnam as a small, open economy, shocks to output and prices
in trading partners also appear to have strong effects on
domestic inflation.
Allowing for the time-varying nature of the parameters and
variance/covariance matrices, the results suggest that the State
Bank of Vietnam (SBV) appears to have been steadily using
monetary policy tools to contain inflation. TVP-VAR results also
confirm that monetary policy in Vietnam appears to lead to
reasonable inflation responses. The evidence therefore supports
the argument that Vietnam’s monetary policy might be more
effective than expected
