Moderating role of macroprudential policy on the bank credit–output nexus in Vietnam: evidence from state-dependent analysis

Abstract

This study examines how macroprudential policy moderates the impact of bank credit, as a key transmission channel of monetary policy, on the distribution of economic output in Vietnam. Using quarterly data from Q2/2008 to Q4/2022, the research provides evidence that a socialist-oriented macroprudential instrument – the credit growth limit – enhances capital allocation efficiency and reduces the concavity of the bank credit–output nexus. Tightening macroprudential policy affects both inefficient firms and high-risk, high-reward ventures that generate high returns during booms. Therefore, the efficiency of capital allocation leads to a heterogeneous moderating impact across the output distribution.