The Impact of the Monetary Policy on the Household Sector in Vietnam: Bayesian DSGE Model Approach

Researching policy impacts on each sector of the economy, especially the household sector, through the dynamic stochastic general equilibrium (DSGE) model has not been exploited much in Vietnam. Aiming to evaluate the impact of the monetary policy on the Vietnamese household sector, the study proposes a DSGE model suitable for small open economies and uses the Bayesian method to estimate the model. Research results show that a shock’s monetary policy by 1 standard deviation u causes the refinancing interest rate to immediately increase by about 0.33%, leading to a decrease in the output gap of about 4.47% and inflation by about 1.49%, the decrease also gradually decreases and disappears after 8 quarters. This result also shows that Vietnam’s inflation seems to be sensitive to policy interest rates but is not too high. Regarding consumer spending, the increase in implementing interest rates causes the change in consumer spending to decrease by 0.09%, this decrease is quite small and gradually fades after 8 quarters. Thus, the Vietnamese household sector has responded following economic theory, but this change is not too large, proving that the household sector is still sensitive to changes in monetary policy.