Doctoral thesis summary: State management of the gold market in Vietnam

Analyze current situation of state management of gold market in Vietnam and its impact on monetary policy in the period of 2006 - 2016, thereby proposing solutions and recommendations to improve efficiency. State management results for the gold market in Vietnam.

INTRODUCTION

1 Problem Statement of the Study

In Vietnam today, the management of operation and regulation of the gold market is

a complex problem for the SBV and the Government Especially since 2009, under the

impact of macroeconomic environment, the world political security is constantly unstable,

so it has greatly affected the operation of the gold market In this context, the SBV has

advocated a number of policies to manage gold bar trading The policy has brought about

certain effects and contributions: Contributing significantly to the addition of foreign

currency reserves, helping to stabilize the exchange rate, creating conditions for the SBV to

strengthen the management of the foreign exchange market, increasing the stability of the

market In the case of the gold market, there are still limitations of the gold market

management policy that the SBV has implemented: the regulations have not been fully

covered, such as the regulations on organization, operation mechanism, gold smuggling

issues and mobilization gold among the people State management of the gold market

covers very broad "socio-economic" issues, closely linked to important policies Currently,

although there are many domestic and foreign studies focusing on gold and the gold market,

there are not many studies on state management policy with the gold market The study of

state management policies for the gold market in Vietnam as a gold is a financial asset is

extremely necessary This is a research gap that the author wants to add with 3 focus points:

(i) presenting the synthesis of theories on state management of gold market in Vietnam

systematically; (ii) assess the state of the state management policy with Vietnam's gold

market in the period of 2006-2016; (iii) propose solutions and recommendations to improve

the efficiency of state management with Vietnam's gold market

Stemming from the above reasons, the topic "State management of the gold

market in Vietnam" was selected as the research topic for the thesis

2 Research Objectives and questions

Research objectives: Analyze current situation of state management of gold market in

Vietnam and its impact on monetary policy in the period of 2006 - 2016, thereby proposing

solutions and recommendations to improve efficiency State management results for the

gold market in Vietnam

Research questions: (1) What is the relationship between the implementation of monetary

policy and state management of the gold market? (2) What is the status of implementing the

State management policy for the gold market in Vietnam? (3) What measures need to be

taken to complete the state management of the gold market in Vietnam today?

3 Research Target and Research Scope

Research Scope: Regarding content: researching the gold market as a financial asset About space: research at Vietnam State Bank, time from 2006-2016

4 Research Methods

The thesis uses two research methods: qualitative and quantitative Qualitative research used in the overview of research, internal content of state management for the gold market, study lessons learned from other countries applied to Vietnam Quantitative research used in collecting, statistically describing data, testing models, estimating variables affecting the state management on Vietnam's gold market by the VAR (Vector Auto-regressive) method The software EVIEW9.0 is used for research

5 The contributions of the thesis

- In theory: The thesis will summarize and present systematically theories about gold, gold

market and state management policies for gold market, the level of completion of the policy

At the same time, studying the relationship between implementation of monetary policy and state management with gold trading activities From there, draw conclusions and propose solutions and recommendations to contribute to improving the efficiency of state management for the gold market in Vietnam Building an appropriate model to evaluate the effectiveness of state management policies for Vietnam's gold market in the 2006-2016 period

- In reality: The thesis applies VAR model for 2 periods from 01/2006 to 04/2012 and

05/2012 to 12/2016 (the time of decree 24/2012 / ND-CP issued, marking the basic changes

on structure of the gold market) to evaluate the effectiveness of state management policies for the gold market in Vietnam before external shocks To answer the research question: How will the state management of the gold market react to changes in exchange rates, interest rates, inflation and foreign exchange reserves?

- Impact of changes in monetary policy management: exchange rate, interest rate, inflation and foreign exchange reserves on gold prices

- The response of macroeconomic variables to the fluctuations of domestic and world gold prices

Empirical research results for gold prices affected by macro variables are exchange rates, interest rates, inflation and foreign exchange reserves of the SBV At the same time, the research results are the basis for the management agencies in the decision-making process to select appropriate policy tools to cope with external shocks in the economy to achieve development goals The gold market is stable and stable; stabilize the macro economy In which, in order for the State management policy for Vietnam's gold market to be effective,

it is necessary to ensure a stable macro environment, and the value of the local currency Thereby, proposing solutions and recommendations for the state management policy for Vietnam's gold market in the period of 2016-2025 and orientation to 2030

6 Dissertation structure

The thesis consists of 4 chapters: Chapter 1: Basic theories on State management of

gold market in the market economy; Chapter 2: Current situation of State management of

gold market in Vietnam; Chapter 3: Model to assess the State management policy impact on

the gold market with macroeconomic variables; Chapter 4: Solutions to improve the State

management policy of gold market in Vietnam

CHAPTER 1: BASIC THEORETICAL REGULATIONS ON STATE

MANAGEMENT OF GOLD MARKET IN THE MARKET ECONOMY

1.1 Overview of the gold market

1.1.1 Theory of gold

1.1.1.1 The monetary role of gold

For 5,000 years of human history, gold has always been fully represented as a means

of monetary circulation on the following three basic functions: a measure of perfect value, a

means of payment, a store of value

1.1.1.2 Classify gold as an IMF financial asset

According to the IMF's accounting accounts system (EC, IMF, OECD 2008), the

classification of financial assets is as follows: “Financial assets are economic assets and

also financial instruments Most financial assets are financial liabilities arising from

contractual relationships that are recognized when an entity provides capital to others ”

(EC, IMF, OECD 2008) In terms of financial assets, gold includes: monetary gold and

SDR In the Law on the State Bank of Vietnam 2010 stated: Foreign exchange reserves

include: Gold under the State foreign exchange reserves In Decree No 24/2012 / ND-CP:

"The State Bank of Vietnam is allowed to add gold bars to the State foreign exchange

reserves"

1.1.1.3 Measurement standards and calculation of converted gold prices

1.1.2 Theory of gold market

1.1.2.1 Gold market concept

However, the scope of the author's research limited gold to be considered a financial

asset Therefore, the author proposed the concept: “The gold market is the place where gold

products trading activities take place - as financial assets, as part of the currency market

The price is determined by the market, the management of the gold market is an important

function of the Central Bank”.

1.1.2.2 Gold market classification

Including: types of products of the market; organizational structure of the market

1.1.2.3 Members participate in the gold market

ETFs), Individuals investing in gold

1.1.2.4 Gold market products

- Group of physical gold products, Group of Trading products, Group of Margin products

1.1.3 Factors affecting gold price

Factors include: Impact of market supply and demand on gold prices, Impacts of economic growth (GDP), Inflation, Interest rates, USD exchange rate; Oil prices; Geopolitical events such as wars and crises

1.1.4 The impact of the gold market in the market economy

1.2 Theories about state management for the gold market

1.2.1 State management policy concept with the gold market

1.2.1.1 Concept

State management policy for the gold market is a system of policies and policies of the State that orient, organize the operation and supervision of the gold market in order to develop the gold market in a stable and sustainable manner, contributing to stabilizing the macro economy background, national economic development

1.2.1.2 The need of state management for the gold market 1.2.1.2 The goal of state management policy with the gold market

- Ensure and maintain the stability of the gold market Ensuring consistency in the implementation of macroeconomic stability policies Protecting investor interests, improving market transparency

1.2.1.3 The role of state management policy for the gold market

The author's point of view, the state management of the gold market should be considered and systematically evaluated and covered on all 3 aspects: management by functions, operations and elements of the gold market

1.2.1.4 State management method with the gold market

1.2.2 The relationship between monetary policy and state management policy to the gold market

1.2.2.1 Impact of monetary policy on gold price

The monetary quantity theory shows that investors will shift from holding money to holding financial assets (including gold or stocks) to receive a higher return, thus promoting price increases gold on the market Thus, in theory the monetary quantity of money supply impacts on gold price is shown as follows:

MS ↑ → due to the effect of the wealth effect → gold demand ↑ → gold price ↑

1.2.2.2 The role of State management of the gold market with the implementation of

monetary policy

1.2.3 The relationship between exchange rate policy and state management policy with

the gold market

1.2.3.1 General theory of exchange rate policy

- Theory of Impossibe trinity:

Mundell and Krugman (1999) developed from the Mundell Fleming model idea: it

is impossible to successfully implement three policies including fixed exchange rate

regime, independent monetary policy and free flow of capital When the trade deficit is

combined with the interest rate difference, it will attract capital flows through channels

such as short-term credit, stock market, gold market, which poses risks to the financial

system because of the instability of this capital inflow Therefore, the government needs

to intervene quickly and forcefully to control this capital flow carefully

1.2.2.2 The impact of exchange rate policy on gold market state management policy

- - Selecting the exchange rate policy objective affecting the state management of

gold market

- - Tools of exchange rate policy affecting the state management of gold market

1.2.4 The relationship between interest rate policy and state management policy for the

gold market

1.2.4.1 General theory of interest rate policy

1.2.4.2 The transmission mechanism of the interest rate channel to monetary policy

1.2.4.4 The impact of interest rate policy on gold market state management policy

In many situations for a country with a high level of goldization, in order to ensure

the effectiveness of the interest rate channel in the implementation of monetary policy,

policy makers, the central bank, will proceed to limit the inter-capital flow through the

domestic and international gold market

1.2.5 Criteria for evaluating state management policies of the gold market

General criteria for evaluating the gold market include: Firstly, consistent with

economic development orientations and strategies Secondly, sustainable development of

the market, contributing to macroeconomic stability Thirdly, in accordance with

international practices and practices Fourthly, ensure consistency and full power Fifth,

stability and transparency Sixth, feasible and effective

1.2.6 Factors affecting state management of gold market

1.3 International experience on State management of gold market and lessons

learned for Vietnam

1.3.1 State management policy for the gold market in China

1.3.1.1 Viewpoints, methods of managing the gold market in China 1.3.1.2 SGE model and how it works

October 31, 2002 SGE was officially put into operation, the floor was closely monitored by PBoC All SGE trading platforms are electronic SGE offers spot gold trading, and option contracts Transactions are paid through the clearing center The most prominent

is that the pricing and control mechanism of the gold market has completely changed Instead of planning the gold trading price of PBoC, the price is marketed through SGE At the moment, only one founding member regulates transactions on SGE and decentralized exchange (OTC)

1.3.1.3 VAT policy for gold in China 1.3.1.4 State management policy of gold market and capital control activities in China

1.3.2 State management policy for gold market in India

1.3.2.1 Infrastructure regulates the gold market in India

Due to its special role to the economy, the Indian gold market is very well segmented

by regulatory agencies with different functions and tasks The Reserve Bank of India (RBI),

as a monetary regulator, regulates and oversees the financial system, plays a dominant role

in the gold market

1.3.2.2 Gold import and export activities in India 1.3.2.3 Tax structure for gold in India

1.3.3 Lessons learned for Vietnam

From the case studies of state management practices for the gold market of China and India, both have confirmed the importance and spread the role of state management to the gold market Every gold market contains certain risks related to the specific market of each country, so the issue of state management for the gold market is always placed urgently, regardless of size or market level Where is the school? Especially, the gold markets are still in its infancy and in the context of macroeconomic fluctuations, it is necessary to follow and strengthen the role of state management

1.4 Study Overview

1.4.1 Foreign studies on the gold market

- Qualitative research on gold market structure: Gary O’Callaghan (1993)

introduced and analyzed in detail the structural diversity of the gold market, Y.V Reddy (1997) The research paper on the change of gold management policy of the Central Bank of India Sun Zhaoxue (2011) has pointed out the relationship between the gold market and the health of the economy, while also giving an overview of gold industry in China Which

highlights the role, mission of developing the gold market, the way to organize in

accordance with the goals

- Research on the operation mechanism of the gold market: Alberto (1983)

provided a complete description of the gold function in the Jamaica system Baur and

McDermott (2010) examined the role of gold in the financial system and considered gold

more stable in terms of returns than stocks, bonds, and other financial instruments

- Macro factors affecting gold price

Interest rate: Harmston (1998) studied data on US Treasury bills and long-term

government bonds from 1896 to 1996 and showed a negative correlation between gold price

trends and the value of Other long-term bonds

USD exchange rate and index: Sjaastad (2008) investigated the theoretical and empirical

relationship between important exchange rates such as USD, Pound, Japanese Yen and gold

using the wrong forecast data and argue that fluctuations in exchange rates between

currencies are the main causes of instability in gold prices

Inflation: Sherman (1983) holds that gold prices are positively correlated with the level of

inflation, regardless of the existence of expected inflation Ranson and Wainwright (2005)

think that gold price is an indicator of inflation and the bond market, and it can act as a

predictor of inflation, short and long term nominal interest rates

Geopolitical events: Barkoulas (2008) pointed out that in an extraordinary geopolitical

event, in the short term, the price of gold increases while the price of gold mining

companies declines

Other factors: Malliaris et al (2009) used an ANN-a neural network to collect data on

gold, oil and the euro from January 4, 2000 to December 31, 2007 Results of time series

analysis indicate that there is a short-term and long-term relationship: oil changes in prices

of gold, euro and oil have a strong impact on gold prices; The relationship between gold and

the euro is the weakest

- Studying the international monetary properties of gold: Cohen (1971) defined

gold as an international currency from the perspective of monetary functions; The function

of international currency is to expand the domestic monetary function abroad Tavlas (1997)

states that when gold is a currency that acts as a measure of value, a means of exchanging

and storing value in international transactions without the participation of currency issuers,

that creates monetary internationalization

- Research on the impact of monetary policy on gold price: William D Lastrapes,

George Selgin (1995a) pointed out a positive gold price shock that caused the gold price to

increase by 2% due to the effect of a gradual increase in the fund rate The federal nearly 10

basis points after about 12 months, and gradually reduced foreign exchange reserves These

findings imply that the average Fed actually changes its foreign exchange reserves in

response to a change in gold prices, though mostly after this change is maintained for several months

1.4.2 National research

Nguyen Van Anh (2009) With the study "Solution to improve the efficiency of gold business management according to the functions of the Central Bank", the author pointed

out that "gold in foreign exchange reserves is gold plays a monetary role At the same time, the central banks of all countries have gold management policies through the management

of gold belonging to the national foreign exchange reserves and management of the domestic gold market” Nguyen Duc Trung (2012) With the study "Solution to manage gold market in Vietnam" for the first time, using econometrics applied to analyzing objectives and tools of SBV regulating gold market in Vietnam in period from 2006 to 2013 The model used is VAR model including 5 variables: domestic gold price, international gold price, inflation, exchange rate, foreign exchange reserves Research shows that inflation, exchange rates, foreign exchange reserves all have an impact on domestic gold prices The author pointed out that the gold management policy of the SBV basically affects the market structure, positively affects the foreign exchange market, and monetary policy Bui Kim

Yen and Nguyen Khanh Hoang (2013) with the research topic "Management of gold prices from a macroeconomic perspective" Research using econometrics as a VAR model for domestic gold prices, world gold prices, deposit rates, exchange rates and inflation to make comments on the SBV's gold market state management policy The study shows the relationship between the deposit interest rate, exchange rate and inflation variables with domestic gold prices in the 10-year period from August 2003 to July 2013 Thereby assessing the positive effects of the State Bank's gold market management policy Nguyen

Thi Thanh Huyen (2015) with her PhD thesis "State management of gold trading activities

in Vietnam". This is a systematic study on state management of gold trading, in which the author uses the method of sociological investigation with questionnaires The paper has systematized the contents of internal management of the state, and at the same time gave the system of criteria to evaluate the perfection of the state management policy of gold trading

Tô Anh Dương (2009) with the study "Gold market management: International experience and policy recommendations for Vietnam" Through practical surveys of two markets, China and India, the author gave the experience of state management to the gold market in Vietnam as: (i) Managing on the basis of respect for market principles, supply laws The SBV's management objective is to make the optimal use of this resource Use gold resources for stable economic development (ii) Promote the concept of market liberalization, the roadmap should be consistent with the general trend Do Thi Thuy (2010) with the research

paper "Vietnam Gold Market 2010 - Impacts on financial policies and operations of

rates, inflation to gold price and surveying activities of commercial banks, the study offers

policy implications Tran Ngoc Tho (2014) with the research paper "Managing the gold

market: The Mission of the State Bank", the research shows that gold is money (ultimate

money) Therefore, gold market management is a tool of monetary policy to manage money

supply At the same time, by settling the gold position, bringing the gold to the balance

sheet of commercial banks, it has contributed to stabilizing the macro economy

1.2 Research gap

From the above summary, the thesis finds that there is still a gap that needs to be

supplemented and completed as follows: The domestic and foreign studies have studied

only a part of the aspect of the price of gold, gold trading activities, State management with

gold trading activities However, the systematic study of state management of the gold

market on the level of gold as a financial asset is a research gap In which, the management

of the gold market is closely linked with the implementation of monetary policy Empirical

research in different countries will yield different results The thesis will approach towards

systematizing monetary policy impacts on gold market state management policies, building

a VAR model including many macroeconomic variables based on economic theories and

drama from external shocks and from state management policies to the gold market by

month Quantifying this relationship in the model will be a highly practical applied research

direction The thesis will analyze the impact of external shocks and state management

policies on the domestic gold market through macroeconomic variables such as interest

rates, exchange rates, inflation and national foreign exchange reserves Data analyzed by

month, from the results of empirical research, the thesis will propose a number of related

solutions to complete the state management policy for the gold market in Vietnam

CHAPTER 2 - CURRNENT SITUATION OF STATE MANAGEMENT OF

GOLD MARKET IN VIETNAM 2.1 Practical gold market in Vietnam

2.1.1 Overview

In Vietnam during a long period of war and political instability, gold was used as a

traditional saving mechanism and even used as a means of payment and price standard for

trading valuable assets The state management of the gold market has always had an organic

relationship with the operation of monetary policy in Vietnam due to its binding on both

laws and mechanisms

2.1.2 The period from before 2006 - The gold market started to be under control

In 1999, the Government issued Decree No 174/1999/ND-CP to expand business

activities in the gold market In 2004, in order to contribute to macroeconomic stability and

difference between the exchange rates listed at commercial banks and exchange rates on the free market Credit growth is estimated at 29% a year on average Immediately, the domestic gold market was supported to create momentum for expansion of both scale and structure

2.1.3 From 2006 to 2009 - Booming gold market

During this period, the domestic gold market continued to fluctuate, always growing hot with an explosion of gold trading units with production functions Beginning

in 2007, Vietnamese commercial banks launched a new type of business, the Gold Exchange In this period, in order to control inflation, the SBV implemented monetary policy tightened Vietnamese commercial banks immediately turned to gold trading on their accounts after the SBV tightened lending criteria for traditional commercial lending activities of commercial banks The price of gold has been constantly increasing, coupled with the long-standing preference of hoarding gold that people have been buying gold Increasing domestic demand for gold has created a high margin between domestic and world gold prices, putting pressure on USD demand to serve gold imports This situation lasted for a long time, causing psychological confusion for people

2.1.4 Period from 2010 - now: The SBV controls the gold market with administrative tools, associating the State management with the goal of stabilizing the macro economy

The gold market witnessed a boom of the market in 2009, but behind the picture there are potential uncertainties as the state management has not kept pace with the development of the market On December 30, 2009, the Government issued an instruction order 369/TB-VPCP for the closing of all gold trading floors with a deadline of March 30,

2010 In April 2011, the State Bank issued Circular 11/2011/ TT-NHNN with the main content being that the SBV prohibited commercial banks from lending gold or accepting deposits in gold (called "gold mobilization") to any individual, organization Decree 24/2012/ND-CP specifically banned gold bars as a means of payment / intermediary exchange, the State switched to exclusive production of gold bars, this is the only unit allowed to import and export raw gold In the case of gold, gold bar trading may only be carried out by licensed entities The SBV holds gold as part of the official list of foreign reserves

2.2 Analyze the status of gold market

2.2.1 The situation of fluctuations between domestic and international gold prices

Since 2012, there has been a clear contraction of the fluctuation range of domestic and international gold prices By resolute measures and efforts through the SBV's impact process, the domestic gold price was more stable before the fluctuations of international gold prices, thereby stabilizing the market

2.2.2 The continuity of the gold market and the foreign exchange market

When the SBV issued Decree 24/2012/ND-CP the correlation between gold price

index and USD has changed, the correlation is not as clear as the previous period Therefore,

it is partly possible to see the effect of the SBV's policy on controlling the gold market

2.2.3 Difference between domestic and international gold prices

The temporary suspension of interconnecting the domestic gold market with

international instruments is a mandatory and prudent step to ensure the monetary security

and internal health of the economy against changes The continuous and regular nature of

the international gold price There exists a margin of difference between domestic and

international gold prices as a result and due to a number of specific reasons as follows:

2.2.3.1 Imbalance between supply and demand for domestic gold

2.2.3.2 High volatility of international gold prices

2.3 Evaluation of State management measures for the gold market by the SBV

2.3.1 State management goal for the gold market of the SBV

Firstly, enhance prevent goldization comprehensively Second, control the supply of

gold bars to the market consistently Thirdly, stabilizing the domestic gold market is closely

linked to macroeconomic stability

2.3.2 Positive aspects of the policy

2.3.2.1 The policy of ending mobilization and lending of gold in credit institutions

The SBV showed initial orientations for credit institutions in mobilizing and

borrowing capital in gold in a tightened direction This move by the SBV has created a

timely reduction of the system's liquidity at the end of 2012, maintaining the necessary

stability for gold prices At the same time combining gold bidding methods for commercial

banks to settle the gold status, the SBV achieved two parallel goals at the same time: to

ensure a stable gold price and gold market; gold is completely excluded from the two debt

assets and creditors of commercial banks

2.3.2.2 Policy on management of gold trading and production activities

With the highest determination in state management of gold trading activities in a

tighter and more disciplined manner, the Government issued Decree 24 The Decree also

made a great impact on market sentiment, falling gold prices but people People did not buy

gold but continued to wait for more information of the market, especially speculation

sentiment nearly disappeared

2.3.2.3 Measures against goldization

Firstly, improve the effectiveness of monetary policy management by the SBV

Second, help stabilize the forex market

2.3.2.4 Measures to stabilize the gold market

- The SBV has created a funnel mechanism in concentrating resources to reinvest in the

economy Unifying a gold brand to help identify easily and ensure the rights of people At the same time, the SBV easily controlled the quality of gold bars in circulation

- The role of market stabilization is strictly and thoroughly implemented by the Government and SBV

2.3.3 Limitations need to be overcome

2.3.3.1 Restrictions in identifying goals, planning strategies for gold market development Firstly , the state management agencies do not have a long-term vision for the gold market, leading to policy formulation that is always slower than the market development

process Secondly, the SBV's regulations are all dealing with specific situations without

specific provisions defining the Gold Market Development Strategy or the Gold Market Development Scheme

2.3.3.2 Restrictions in the legal framework governing the gold market Firstly, the SBV has not issued any regulations related to overall planning, detailed

design and construction of the gold market Secondly, a number of state management policies on the gold market are lacking in comprehensiveness Third, the legal regulations

on gold market activities are not consistent with other laws Fourth, the stability of state

management policy of the gold market is not high

2.3.3.3 Restrictions in organizational structure of state management of gold market Firstly, the apparatus of State management of the gold market in Vietnam is a product that can handle the subjective situation of managers, but not really derived from the

development function of the gold market Secondly, not in line with international practices,

all have formed a specialized agency, independently managing the gold market, thus partly

reducing the independence and flexibility in managing the gold market Thirdly, the

organization of the state management apparatus for the gold market is still in favor of the state administrative organization organized by the SBV

2.3.3.4 Restrictions on policies and tools for State management of the gold market Firstly , the system of policies and tools is still inconsistent, many aspects are limited

Secondly , instrumental policies cause financial repression, affecting the stability of policies and causing distinctions of business entities in the market

2.3.3.5 Policy on managing gold bar business activities Firstly, the openness and transparency of regulations on the gold bullion bidding process, the announcement of the bidding results, and the announcement that the volume of

gold bullion purchases and sales of the SBV is not high Second, policies to mobilize gold

reserves among the people have not been effective

2.3.3.6 Tax policies governing gold trading activities Firstly , in fact, the feasibility and effectiveness of VAT calculation by the method of direct VAT calculation with the same tax rate is applicable to a mixed business

establishment which has just conducted business activities Gold trading has not had high

gold production yet Second, SCT for gold trading has not yet shown its role as a guiding

tool

2.3.3.7 Gold smuggling problem

In fact, the problem of gold smuggling is always a historical issue in Vietnam, when

the official channels of gold import are limited, there will be unofficial channels of unofficial

channels, these channels exist very diverse form

CHAPTER 3: MODEL FOR ASSESSING THE IMPACT OF STATE

MANAGEMENT POLICIES ON THE GOLD MARKET WITH MACRO

ECONOMIC VARIATIONS 3.1 Research design

3.1.1 Research models

Inheriting the views of the views of other models, the author chooses 6 variables:

Domestic gold price, International gold price, National foreign exchange reserve, Average

deposit interest rate under 12 months of Vietcombank, USD / VND exchange rate of

Vietcombank, Inflation Vietnam (CPI) The variables of the model are converted into a first

order difference of natural logarithms instead of being absolute values

3.1.2 Study samples, research data and analytical methods

The observed sample consists of 132 observations (11 * 12 months) from January 2006 to

December 2016, the variables VNGOLD, INTERGOLD, INTEREST, VCBXRATE were taken

averagely monthly, VNCPI, FRES variables were taken according to month The price analysis of

data splits into 2 phases from January 2006 to the effective date of Decree 24 (April 2012) and the

period since Decree 24 was officially implemented, the SBV officially tightened management

gold market management in May 2012 to 12/2016 to clarify the relationship between exchange

rates and gold prices in these two sections The dissertation uses the VAR - Vector

Autoregression to analyze the impact of state management policies of the gold market The

EVIEW9 software is used for analysis of the above model

System of estimated equations

The estimated model consists of a system of equations as follows:

+ ε1t

k: Hysteresis value

α, γ γ, , , ε : square coefficient matrix of the equation

3.3 Results of running the model and discussion

3.3.1 Stationary test and lag in model

(i) Stationary test

Performing ADF Test for VAR model, all variables VNGOLD, INTERGOLD, FRES, INTEREST, VNCPI, VCBXRATE all stop at the first level difference with significance level of 1% Therefore, according to Sim, C.A (1980), the above variables can

be used in the VAR model

(ii) Choose lag in VAR model

The results show that the FPE, AIC, SC, and HQ tests all give a lag of 1, while the

LR test is 5 Therefore, the author chooses the optimal lag of 1 for the VAR model of phase

1 (due to have more statistical test numbers)

The results show that the FPE SC and HQ tests all give lag of 0, and LR and AIC tests are 6 Empirically, any policy has a certain lag, so the study continues Use the Portmanteau test to determine the optimal lag Portmanteau test for VAR model shows that the optimal level of VAR 2 stage model is 1 Therefore, the study will use VAR 2 phase model with an optimal lag of 1

3.3.2 Test autocorrelation of the residuals and stationary of model

(i) Test autocorrelation of the residuals

We have a phase 1 VAR model with lag of 1 with no autocorrelation

We have a phase 2 VAR model with lag of 1 with no autocorrelation

(ii) Test stationary of model

Using the AR ROOT TEST test, we have both the VAR model of 2 stages 1 and 2 with lag of 1 which has passed the basic tests so it can be applied in analysis and forecasting

3.3.3 Impulse-Response analysis result

(i) Relationship between exchange rates and domestic and international gold prices

- Impulse-Response function between VCBXRATE and VNGOLD, INTERGOLD of VAR model phase 1

The results of the reaction show that before the issuance of Decree 24/2012 / ND-CP

on gold business management, at the time of the domestic gold price increase shock with a

magnitude of one standard deviation Vietcombank's selling rate also increased by 0.2%,

international gold price increased by 1 standard deviation, Vietcombank's selling rate

increased by 0.5%

- Impulse-Response function between VCBXRATE and VNGOLD, INTERGOLD of

VAR model phase 2

In contrast, the results of the Impulse-Response in the picture above show that after

the issuance of Decree 24, the exchange rate turned back when there was a shock of gold

price increase The relationship during the period from May 2012 to December 2016 was

that the domestic gold price increased by 1 standard deviation, the selling rate of

Vietcombank decreased by 0.10% after 1 month and quickly balanced again in When the

international gold price increased by 1 standard deviation, Vietcombank's exchange rate

decreased by about 0.03%, but the reaction occurred at the time when the gold price

increased (without delay) This proves that the relation between the exchange rate and the

world gold price after Decree 24 is the negative relationship and the reaction of the

exchange rate with the world gold price faster than domestic gold price Thus, the

application of Decree 24 has changed the nature and direction of the relationship between

exchange rates and domestic (international) gold prices

(ii) Relation between CPI and domestic gold price

When there is a shock about gold price, the CPI does not change immediately but it will tend to peak at 2 months, then decrease gradually within 6-7 months However, in phase 2, the fluctuation trend of CPI tended to be smaller

At phase 1, when the CPI increases by 1 standard deviation, the price of gold increases by 1.3%, but then decreases and then returns to equilibrium However, in the second phase, if CPI increases by one standard deviation, gold price decreases by 0.3% and then stabilizes within 6 months

(iii) Relationship between interest rates and domestic gold prices

When there was a shock about the gold price increased by 1 standard deviation, in phase 1, the average mobilizing interest rate increased by 2.6% However, in the period of 2 cents, the interest rate is almost unchanged

Phase 1 Phase 2

On the other hand, the shock of average mobilizing interest rate has no immediate

impact on gold price, the effect is not significant after that

(iv) Quan hệ giữa dự trữ ngoại hối với giá vàng trong nước

When there was a shock about gold price increased by 1 standard deviation, in phase

1, the average mobilizing interest rate increased by 0.7% However, in phase 2, it is not

changed immediately and tends to increase from 3 to 6 months

In the opposite direction, the shock of the foreign exchange reserves has almost no

immediate impact on the price of gold, this is shown in both periods

(v) The relationship between domestic gold prices and the shock of domestic and

international gold prices

At phase 1, the impact of shock is very large and happens quickly in the short term of

1 month, when VNGOLD's shock increases by 1 standard deviation, VNGOLD increases by 7.7% Phase 2 of the impact of the shock is longer but the magnitude is smaller, the level of the impact of the shock of VNGOLD increases by 1 standard deviation, the VNGOLD increases by 4.7%, the impact decreases gradually within 4 months

The reaction of the domestic gold price to the shock of the international gold price in two periods was quite weak in the first cycle and affected within 3-4 months This shows that the domestic gold price is greatly affected by the psychology of speculators

3.3.4 The result of the variance decomposition of domestic gold price

(i) Variance Disintegration of domestic gold price at phase 1

Table 3.1: variance decomposition of VNGOLD at phase 1

(VNCPI)

DLOG (VNGOLD)

DLOG (INTERGOLD)

DLOG (VCBXRATE)

DLOG (FRES)

DLOG (INTEREST)

(ii) Variance Disintegration of domestic gold price at phase 2

Table 3.2: variance decomposition of VNGOLD at phase 2

(VNCPI)

DLOG (VNGOLD)

DLOG (INTERGOLD)

DLOG (VCBXRATE)

DLOG (FRES)

DLOG (INTEREST)

6 0.004836 8.960536 90.19484 0.215677 0.057401 0.372058 0.199490

Variance Decomposition of VNGOLD in two phases shows that: in both periods, the

influence of variables VCBXRATE, FRES, INTEREST on domestic gold price of

VNGOLD is low The first stage is respectively 0.25%, 1.63%, 0.15%; the second stage is

respectively 0.05%, 0.37% and 0.19%

At the same time, the influence of international gold prices on domestic gold prices

tends to decrease from 0.54% to 0.21% Therefore, the domestic gold price is more stable

due to external impacts when the SBV strictly controls the gold market

3.3.5 Discuss results and policy suggestions

The results of running the VAR model in the two periods from 01/2006 to 04/2012

and 05/2012 to 12/2016 are statistically significant because they have passed the basic tests:

LM Test has no significant correlation between residuals, the model ensures stability

Firstly, the research results of the thesis are consistent with some previous empirical

studies Second, Vietnam's gold market is very specific in nature, exchange rate variables,

inflation, interest rates have little impact on the price of gold The level of explanation and

reaction of the above variables on gold prices is very low This is explained by the specific

characteristics of Vietnam's gold market Thirdly, the influence of exchange rate, inflation

and interest rate variables tends to decrease with gold price Especially, the relationship

between the exchange rate and the world gold price after the SBV controls the gold market

is inversely related The impact cycle of the above variables is usually from 2-3 months, but

the opposite effect of gold prices on these variables is larger and has a longer impact period

of 5-6 months At the same time, the domestic gold price is greatly affected by the

management policy of the SBV Therefore, the gold market management policies of the

SBV need to be stable and consistent in order to make the gold price more stable,

contributing to stabilizing the macro economy

CHAPTER 4: SOLUTIONS TO IMPROVE THE STATE MANAGEMENT

POLICY OF GOLD MARKET IN VIETNAM

4.1 Objectives, views and orientations for gold market development in Vietnam

4.1.1 The objective of developing Vietnam's gold market

Firstly , to build a stable and efficient gold market on the basis of perfecting the

management activities of the state management agencies on the gold market, improving

market stability, contributing to limiting negative impacts on the macro economy Thirdly,

gradually liberalize the gold market according to a suitable roadmap suitable to the general

context of the economy and the level of market development Fourth, mobilizing to use

capital in the form of gold effectively to develop the economy

4.1.2 Viewpoint of completing state management for the gold market in Vietnam

Firstly , improving the State management of gold market must be systematic,

inclusive and synchronous between all stages of the management process Secondly, state

management of the gold market must be balanced, in accordance with the conditions of the

people and market rules Thirdly, state management for the gold market must work towards

a stable and efficient market

4.1.3 Orientation of gold market development in Vietnam in the period of

2021-2025

Firstly, developing the gold market in accordance with the current economic conditions and following the general trend of economic development; At the same time, step

by step towards international economic integration on the basis of complying with

international standards and practices Secondly, improving the market organization system

on the basis of enhancing the role of supervision and state management with market

participants to minimize market risks and ensure investors' rights Thirdly, perfect the legal framework and policies to support the gold market Fourthly, to build a centralized gold

trading floor, diversify products in the market, the State Bank plays the role of regulating the market

4.2 Policy solutions to improve the state management of gold market in Vietnam

4.2.1 Complete the tasks and goals of State management of the gold market in Vietnam

4.2.1.1 The basis of defining the tasks, objectives of state management of gold market

4.2.1.2 Pillar value of state management tasks and objectives for the gold market

4.2.2 Improving the organization of state management apparatus for the gold market

The National Gold Board is a specialized governing body composed of members representing the relevant governing bodies The author proposes the establishment of the Gold Board of Vietnam (GBV) under the SBV, with members representing the relevant governmental agencies under the Government The purpose is to have a consensus on policy decisions related to gold, to maximize the benefits between the participants