MONETARY POLICY SPILLOVERS FROM THE U.S. AND CHINA TO VIETNAM: A BAYESIAN VECTOR AUTOREGRESSIVE MODEL

Abstract

This study examines the asymmetric spillover effects of monetary

policy tightening in the United States and China on a small, dual-ex-
posed emerging Vietnam economy. It investigates how changes in the

Federal Reserve’s federal funds rate and the People’s Bank of China’s
benchmark lending rate transmit through financial and trade channels

to shape Vietnam’s macroeconomic outcomes. Using a Bayesian Vec-
tor Autoregressive model and quarterly data from 2005 to 2024, we

estimate Vietnam’s macroeconomic responses to policy rate shocks
originating from the Federal Reserve and the People’s Bank of China.

Our results confirm that United States monetary tightening induces im-
mediate but statistically insignificant depreciation of the Vietnamese

dong and sharp, reversible portfolio outflows, with muted impacts on

GDP and inflation due to effective State Bank of Vietnam interven-
tions. In contrast, Chinese rate hikes generate significant short-term

import-price pressures, raising CPI by as much as 1.7 % and prompt-
ing a stronger State Bank of Vietnam policy response. Neither source

of external tightening yields lasting output effects, suggesting that

Vietnam’s domestic policy framework effectively buffers adverse im-
pulses. These findings underscore the imperative for monetary author-
ities to employ an integrated policy toolkit capable of distinguishing

overlapping external shocks. This study contributes a unified empirical
framework that disentangles simultaneous spillovers from the world’s

two largest monetary powers, offering generalizable guidance for poli-
cy design in similarly dual-dependent emerging markets.