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Monetary policy's impact on Vietnamese stock market bubbles

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  • Ngoc Anh Pham
  • Phuong Lan Le
  • Bin Sy Nguyen

Abstract

This study investigates the relationship between monetary policy and stock market bubbles in Vietnam over the period 2010-2022. Using the supremum augmented Dickey-Fuller (SADF) and generalised supremum augmented Dickey-Fuller (GSADF) tests, the paper first confirms the presence of stock market bubbles in both the Ho Chi Minh City (VNI) and Hanoi (HNX) indices during several subperiods, notably 2017-2018 and 2020-2022. Subsequently, a vector autoregression (VAR) model is employed to examine the influence of key monetary policy instruments - overnight interbank interest rate, refinancing rate, money supply, inflation, and industrial production index - on bubble dynamics, represented by the P/E ratio. The results show that higher interbank and refinancing rates are associated with shrinking bubbles, while money supply, inflation, and industrial production exert relatively weak or insignificant impacts. The findings highlight the critical role of interest rate management in mitigating stock market bubbles and offer policy implications for regulators and investors in emerging markets like Vietnam.

Suggested Citation

  • Ngoc Anh Pham & Phuong Lan Le & Bin Sy Nguyen, 2026. "Monetary policy's impact on Vietnamese stock market bubbles," International Journal of Business and Emerging Markets, Inderscience Enterprises Ltd, vol. 18(7), pages 1-22.
    • Handle: RePEc:ids:ijbema:v:18:y:2026:i:7:p:1-22
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