An empirical study on impact of monetary policy on Vietnamese stock market’s liquidity

• Main Authors: Do, Phuong Huyen, Ngo, Thanh Thanh Huyen
• Other Authors: Khoa Quốc tế, ĐHQGHN
• Format: Article
• Language: English
• Published: Financial Publisher 2020
• Subjects: Liquidity; monetary polity
• Online Access: http://repository.vnu.edu.vn/handle/VNU_123/89404
• Institution: Vietnam National University, Hanoi

This study examines the effect of monetary policy on the liquidity of the Vietnamese stock market between November 2014 and November 2017 with a sample of 50 companies in the above period. Three liquidity measurements including Amihud, Turnover and Zeros are used to measure the liquidity of the market. Two major variables of monetary policy and three liqiudity measurements are used in the VAR model. The results show that changes in to two main variables of manetary policy have a consistent effect on the liquidity in the market. In particular, an incearse in the M2 supply leads to the rise of liquidity aand an increase in interest rates reduces liquidity. Meanwhile, the rise of inflation reduces the liquidity of the market. Shock in the volatility of profitability reduces the liquidity of the stock market.