The monetary policy transmission mechanism and its impact on banks' profitability : evidence from Vietnam

english

2026

volume 17, issue 1

bank profitability   exchange rate channel   interest rate channel   lending channel   monetary policy transmission mechanism

GEA College
(Obvezni izvod spletne publikacije)

This study investigates the monetary policy transmission mechanism and its impact on bank profitability in Vietnam, where comprehensive analyses of multiple transmission channels remain limited. Especially, the relationship between monetary policy changes and bank profitability in this emerging bank-based economy has received relatively little attention. Existing research often focuses on isolated channels or produces inconsistent findings due to variations in national financial structures. To address these gaps, this study examines how monetary policy influences the profitability of Vietnamese commercial banks through three primary channels: the interest rate channel, the exchange rate channel, and the bank lending (credit) channel. Using the Generalized Least Squares (GLS) method on annual data from 28 Vietnamese commercial banks over the period 2014–2023, the empirical analysis reveals significant responsiveness of bank profitability to monetary policy shifts. The interest rate and bank lending channels show negative correlations with profitability, whereas the exchange rate channel shows a positive effect. These findings confirm the substantial role of monetary policy transmission in shaping bank performance within Vietnam’s bank-dominated financial system and highlight the consistent influence of various bank-specific determinants across different model specifications. The results provide valuable insights for policymakers and regulators seeking to design effective monetary frameworks suited to emerging economies.

02.07.2026