Relationship Between Regulatory Interest and Market Interest Rates in Vietnam: Quantitative Analysis Perspective

Abstract

The article studies the relationship between regulatory interest and market interest rates in Vietnam from 2015 – 2022. This relationship has been mentioned in many theories and empirical studies in different countries and in different periods. In order to explain it, the research team collected data on the refinancing rate – which represents the regulatory interest rates and lending rates – representing the market interest rates from 2005 to 2022. The data is collected quarterly and analyzed using Eviews8 software to build a linear regression model showing the relationship between regulatory interest rates and market interest rates during the research period. In this article, the research team divides the research period into three phases: 2005Q1 – 2011Q4, 2012Q1 – 2016Q4, 2017Q1 – 2022Q4. The results of the linear regression model show that for the period 2005Q1 – 2011Q4, when the regulatory interest rate increases by 1%, the market interest rate increases by 1%, the market interest rate increases by 0.7326%; for the period 2012Q1 – 2016Q4, when the regulatory interest rate increases by 1%, the market interest rate increases by 0.5943%; for the period 2017Q1-2022Q4, when the regulatory interest rate increases by 1%, the market interest rate increases by 0.2269%. This shows a positive relationship of regulatory interest rate and market interest rate. In addition, for the period 2012Q1-2016Q4, the research team added trend variables and for the period 2017Q1-2022Q4 the research team added trend variables and dummy variables to the regression model. It also proves that the market interest rate in the research period is governed by the trend and volatility of the economy. From the research results, the research team made several exchanges and discussions to improve the effectiveness of the interest rate management policy in order to achieve the goal of stabilizing the macro economy and supporting economic growth.