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Thursday, June 13, 2024

Pros and cons

By Khanh Nguyen

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“Credit management must ensure providing sufficient credit timely, not with excessive amounts to spark inflation or speculation and not with insufficient amounts to hinder economic growth. With this objective, keeping or abolishing credit growth quotas has both advantages and shortcomings,” explained Associate Professor and Ph.D. Nguyen Huu Huan from the University of Economics HCMC in a discussion with The Saigon Times. Enough capacity for credit room abolishment? The debate surrounding whether to maintain or eliminate the credit growth quota system has gained traction following statements from the leaders of the State Bank of Vietnam (SBV) indicating a thorough review of credit growth management. The decision on whether to retain the credit growth target or explore alternatives is a matter that requires careful consideration and continued study in 2024. In developed economies like the United States, credit management relies on three primary tools: the required reserve ratio, open market operations, and the discount window. These tools empower the central bank to regulate money supply in the credit market effectively. They allow for responsive adjustments—expanding money supply when demand exceeds supply and tightening it to prevent inflation when supply outpaces demand. This flexible approach ensures that money supply aligns with the credit […]
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