Economic theory defines the “triangle of impossibility” as a nation’s inability to simultaneously pursue three macroeconomic goals: a stable exchange rate, free capital flows, and an independent monetary policy. This theory was named the Mundell-Fleming Model, put forward by Robert Mundell and Marcus Fleming in the 1960s. In general, in its approach to the triangle of impossibility, the monetary policy in Vietnam bears resemblance to China in several ways. Over the past few years, China has enacted capital controls in order to dampen inflation. Specifically, China tightly controls foreign borrowing and foreign portfolio investment as a means to combat carry-trade and capital circulation shocks. In this article, we will look at China’s controls on inbound foreign direct investment capital to draw parallels with Vietnam. The key Chinese legislation is Circular 142/2008 of the State Administration of Foreign Exchange (SAFE). Under this circular, the Renminbi … [Read more...] about Relaxed policies governing FIEs may bear bitter fruit
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The International Monetary Fund (IMF) on Thursday warned central banks to be alert to the potential financial risks of super-loose monetary policy adopted to cope with the financial crisis. "So far, so good, but if the time that central banks have provided through their unconventional policies is not used productively by financial institutions and their regulators, at some point we can expect another round of financial distress," said Laura Kodres, Assistant Director of the IMF's Monetary and Capital Markets Department. Major central banks have taken exceptionally loose monetary policy, consisting of ultra-low interest rates and large-scale bond buying, to boost the economy since 2008. The U.S. Federal Reserve has kept the short-term interest rate near zero for over four years and is currently buying 85 billion dollars of treasury securities and mortgage-backed securities each month. Last week, the Bank of Japan unveiled a series of more aggressive easing measures over two years to end … [Read more...] about IMF warns of potential financial risks of loose monetary policy
The UK has agreed to provide technical assistance for Vietnam to improve its capacity of policy-making and monetary policy management as well as management of the commodity market through training courses, exchange of experts and professional discussions. This is part of agreements reached at the fifth meeting of the Vietnam-UK Joint Economic-Trade Committee (JETCO 5) that took place in Hanoi on Nov. 4 with the aim of boosting the bilateral trade relations on a par with the strategic partnership between the two countries. The UK will also assist Vietnam in negotiations on a Voluntary Partnership Agreement under the EU’s Forest Law Enforcement, Governance and Trade (FLEGT). In addition, the two sides are to continue discussing the possibility of negotiating and signing an agreement on recognition each other’s sailor certification. Under the co-chair of Vietnamese Deputy Minister of Industry and Trade Tran Quoc Khanh and Edward Oakden, Managing Director of the UK Trade and … [Read more...] about UK to provide technical assistance in policy making capacity
Related News Vietnam sets up financial and monetary policy council By Toan Dao  June 19, 2016 | 12:00 pm GMT+7 Prime Minister Nguyen Xuan Phuc has decided to establish a National Council for Financial and Monetary Policy Consultation, led by Deputy Prime Minister Vuong Dinh Hue. Governor of the State Bank of Vietnam Le Minh Hung has been named permanent vice president of the 39-member council, while the two vice presidents are Minister of Finance Dinh Tien Dung and Chairman of the National Financial Supervisory Committee Vu Viet Ngoan. Deputy Prime Minister Vuong Dinh Hue. Photo by VnExpress/Duc Hung The council is responsible for discussing and proposing recommendations to the government and the PM regarding important guidelines, policies and projects as well as important issues in the field of finance and monetary policy. It will also consult on other issues relating to the implementation of financial and monetary policies assigned by the PM. … [Read more...] about Vietnam sets up financial and monetary policy council
by Mai Phuong Japan's Liberal Democratic Party (LDP) leader Shinzo Abe speaks at a press conference in the LDP headquarters in Tokyo on Monday. The incoming Japanese prime minister came out fighting after his sweeping election victory, saying there can be no compromise on the sovereignty of islands at the centre of a dispute with China. — AFP/VNA Photo Three years after a crushing defeat, the landslide victory of the Liberal Democrat Party in the recent election has pushed Japan – the third-largest economy in the world - into a new era that will decide the future of both national development and regional security. Sunday's victory marked a return to power for the party's leader Shinzo Abe, along with a re-energized conservative administration and the departure of Yoshihiko Noda. The LDP led the polls in the run-up to the election by an overwhelming majority, gaining 294 seats in the 480-seat lower house of parliament. By campaigning heavily for fiscal stimulus and … [Read more...] about Can Japan make light of latest new dawn?