“Monetary policy is not a magic wand and excessive money supply does not necessarily promote growth,” Assoc. Prof. Dr. Nguyen Huu Huan from the University of Economics Ho Chi Minh City has said in an op-ed for The Investor. This warning comes on the back of a supply-side push to stimulate lending in Vietnam which has seen some banks offer interest rates of 0 percent.
Key points of note:
- Vietnam could be risking falling into a liquidity trap;
- Vietnam should pursue a neutral monetary policy with the money supply just enough to cover the economies needs;
- Vietnam’s money supply should be managed through injections as withdrawals as needed; and
- “If increasing the money supply could lead to strong long-term economic growth, all countries would be rich.”
