Impact of Monetary and Macroprudential Regulation on Bank Stability: A Bayesian Mixed-Effects Analysis

Abstract

After the global crisis 2008–2009, like many countries, Vietnam began implementing macroprudential policy. So the combination of monetary and macroprudential policy has been becoming an increasing concern of governments and central banks. This study examines the impact of monetary and macroprudential regulation on bank stability in Vietnam. By using Bayesian mixed-effects regression method on a panel data of 31 commercial banks between 2008 and 2019, we investigate macroprudential and monetary tools affecting bank stability in Vietnam. The research results show that M2 money supply, capital adequacy ratio, interbank interest rate, and interaction variable between monetary and macroprudential regulations exert a strongly positive impact on bank stability, whereas the impact of liquidity ratio and loan deposit ratio is ambiguous.