The Impact of Monetary Policy and Accessibility of Foreign Investment to the Firm's Investment Spending: The Evidence of Vietnam1
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Author: Nguyen Thi Minh Hue, Dao Hoang Tuan and Doan Minh Hoang
Author Address: School of Banking and Finance, National Economics University, Hanoi (Vietnam), International School of Economics and Finance, Academy of Policy and Development, Hanoi (Vietnam) and 3IBD, National Economics University, Hanoi (Vietnam)
Keywords: Foreign investment, HNX, HOSE, monetary policy.
JEL Codes: C13, D24, F21.
Abstract
This study investigated the influence of monetary policy and the accessibility of foreign investment on firms' investment spending using random effect regression. Using comprehensive domestic data that covers 550 listed firms on two stock exchanges, the Ho Chi Minh Stock Exchange (HOSE) and the Hanoi Stock Exchange (HNX), between 2017 and 2021, we record three fundamental findings. The findings were monetary policy considerably impacts a firm's investment decisions in that higher interest rates lead to lower levels of investment spending, resulting in a lag effect; the inaccessibility of foreign investment also harms a firm's investment spending, again with a lag effect; and the relationship between monetary policy and a firm's investment profile was influenced by the accessibility of foreign investment. Enterprises that received foreign capital would be able to access more capital sources, so the impact of monetary policy on the investment expenditure of the firm should be more negligible. These results showed that both monetary policy and the accessibility of foreign investment significantly affect a firm's investment spending, and there was an interaction between those two factors.
Description
Indian Journal of Economics and Development
Volume 18 No. 4, 2022, 777-789
DOI: https://doi.org/10.35716/IJED/22270
NAAS Score: 5.15 (2022)
Indexed in Clarivate Analytics (ESCI) of WoS
Indexed in Scopus (SJR: 0.18)
UGC Approved (UGC-Care List Group II)