Impacts of monetary policies on the real estate bubble in Hanoi, Vietnam

Abstract

The development of the real estate market always goes hand in hand with the fluctuation of the economy. In recent years, this market has experienced many recessions and «freezes» associated with the appearance of a real estate bubble. To approach this issue, this paper studies and gives an overview of the real estate bubble and the impact of monetary policies on the real estate bubble in Vietnam. This paper’s purpose is to identify and measure the influence of monetary policies, including interest rates, credit and money supply, on the real estate bubble in Ha Noi. The vector autoregression model (VAR) is used to test the interaction of the variables in the model. Dickey-Fuller test (DF) is applied to determine the stationarity of the variables, while the Akaike information criterion (AIC), Likelihood Ratio (LR), Final prediction error (FPE), Hannan-Quinn information criterion (HQ) and Schwarz criterion (SC) are used to find optimal lag of the model; then Granger causality test is utilized to determine the two-way correlation between variables. The results showed that the real estate bubble reacted quickly to shocks from macroeconomic factors representing the monetary policy, consisting of interbank interest rates, credit growth, and money supply growth. Thus, it is concluded that monetary policy is not only the cause of formation, but also one of the effective solutions to deflate the real estate bubble. AcknowledgmentThis research is funded by Vietnam Ministry of Education and Training (MOET) under grant number [B2022-NTH-03].

Keywords

• credit
• Hanoi real estate bubble
• interest rate
• money supply
• Vietnamese monetary policy