Transmission mechanisms of credit growth quota on Vietnam’s economic output

Abstract

The credit growth quota policy, introduced by the State Bank of Vietnam in 2011, functions as a a macroprudential instrument directly constraining the lending capacity of individual banks. While primarily designed to safeguard financial stability, this policy exerts spillover effects on economic output. This research investigates the impact of credit growth quota on Vietnam’s economic performance and the transmission mechanisms. Using multivariable regression techniques on quarterly time series data from the first quarter of 2005 to the third quarter of 2023, the analysis reveals that credit growth quota has a positive impact on output through the financial stability and the credit channels, but a negative impact through the real lending rate channel.