Foreign Reserve Accumulation and Sterilization Effectiveness in Vietnam

摘要

After Asia financial crisis, Vietnam was a persistent foreign reserve accumulator with two episodes of accumulation interrupted by the global financial crisis. The study explores the effectiveness of sterilizing monetary impact of reserve accumulation in both episodes. Employing two-stage least squares (2SLS) method to estimate simultaneous equations of central bank reaction and balance of payments functions, the study finds overall partial effectiveness of sterilization at 78%. The explanations of incomplete effectiveness sterilization are relied on high capital mobility and inappropriate scale and timing of interventions. Besides, the result of rolling estimation with 30 quarter-sample indicates the degree of sterilization tends to increase and higher in the second episode of reserve accumulation, which can be explained by the improvement of sterilization operation.