Title: Interest Rate Policy and Its Spillover Effects on Household Consumption Amid Global Inflation: Evidence from Vietnam
Authors: Tran Huynh Minh Thu
Nguyen Hoang Thanh
Nguyen Manh Ha
Volume: 10
Issue: 8
Pages: 61-70
Publication Date: 2026/08/28
Abstract:
Studies of U.S. monetary policy spillovers to Vietnam report an apparent puzzle: the financial channel is active, yet estimated effects on output and inflation are muted. This paper argues that aggregate measures mask heterogeneity across expenditure categories, and that this heterogeneity is where the cost of imported tightening becomes visible. Using high-frequency-identified U.S. monetary surprises as an external instrument for Vietnamese money market rates, local projections are estimated on monthly data for 2010-2025. Pass-through is partial: a surprise raising the U.S. one-year rate by 100 basis points lifts the three-month interbank rate by 42 basis points while leaving the announced refinancing rate broadly unchanged. The induced tightening reduces real household consumption by 0.62 percent at a trough nine months after impact. The incidence is uneven: tourism revenue falls by 2.84 percent and accommodation and food service revenue by 1.35 percent, against 0.28 percent for retail sales of goods. Since goods account for 78 percent of expenditure and tourism for less than one percent, the aggregate reflects little of the adjustment borne by households consuming discretionary services, or of its concentration in labor-intensive sectors with high informal employment. The response is 0.69 percentage points larger when global inflation is elevated, suggesting that the domestic cost of imported tightening is highest when the option of declining to import it is most constrained.