Abstract
This research evaluates impact of monetary policy tools and fiscal policies on Vietnam’s stock market, as well as examines interaction between these two policies with the Vietnam stock price index. Utilizing Vector error correction model (VECM), with 9 variables and data monthly statistics from January 2002 to October 2015, this study confirms that there are links between monetary policy, fiscal policy with Vietnam's stock market. In addition, Vietnam’s stock market is also affected by exogenous factors, namely the world oil prices and the S&P500 index, especially when Vietnam's economy is opening up and integrated with the global economy.
Highlights
In Vietnam, the stock market plays an important role in mobilizing and allocating a large amount of capital to achieve the goal of industrialization and modernization: a sustainable development economy, an efficiency economy restructure, a competitiveness improvement
In 2009, the stock market changes returned positively, that presented though both Vietnam stock index (VNIndex) and HNX–Index raised above 50%, the number of listed companies in both two trading centers was 541 at the end of the year, the total market capitalization was 620.551 trillion dong and equivalent to 38% of GDP
The study points out the interaction effects between monetary policy and fiscal policy
Summary
In Vietnam, the stock market plays an important role in mobilizing and allocating a large amount of capital to achieve the goal of industrialization and modernization: a sustainable development economy, an efficiency economy restructure, a competitiveness improvement. Vietnam stock market officially operationed in the year of 2000 with only two listed companies with market capitalization reached 986 billion (0.28% of GDP at this time). The stock market is very sensitive to macroeconomic changes as well as to the behavior and psychology of investors, so just a small mistake will create disruption on the financial markets, affecting to the entire economy. This explains why the development and stability of securities markets is the most concerns in economic development of each nation. Each change in monetary policy or fiscal policy would have created an either direct or indirect impact on the stock market. This study mainly focuses on assessment the impact of monetary policy and fiscal policy tools on Vietnam stock market to forecast the stock market reaction as well as the interaction of two these policies and making recommendationsfor investors and policy makers based on the results
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