State the Research Reason, Research Problem, Objective, Subject, Scope of Research, Method, Data, Main Contributions and Structure

𝑀𝐼 = + 

∗ 𝐼𝐹𝐼 + 

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∗ 𝐸𝑆 + 

∗ 𝑅𝐸𝑆 (1.1)

In which, MI, IFI, ES, RES are the independent variables of monetary policy, financial integration, exchange rate stability, and foreign exchange reserves, respectively. The impact of financial integration on independence

monetary policy is determined by the sign and magnitude of the coefficient 

. Direction

The equation (1.1) also shows the impact of exchange rate stability and foreign exchange reserves on Vietnam's monetary policy independence through coefficients  2 and  3 , respectively .

The method of calculating variables in the model is similar to Aizenman & ctg (2008), in which CSTT independence is measured by the correlation index between the daily overnight interest rate on the interbank market of Vietnam and the US interest rate, exchange rate stability is calculated by the quarterly standard error of the daily bilateral exchange rate between VND and USD, foreign exchange reserves are calculated as a percentage of GDP. As for the level of HNTC, the study measures it according to the real method developed by Lane & Milesti-Frerreti (2006), calculated by the total accumulation of assets and liabilities of the three components of FDI, FPI and other investment capital, as a percentage of GDP. The research period is from 2009Q1 - 2019Q2 to avoid structural breakdown during the global financial crisis affecting the research results.

To achieve the second research objective , the thesis uses a quantitative method with a structural vector autoregression model (Structural Vector Autoregression - SVAR) to measure the response of Vietnam's long-term interest rates to external factors such as US long-term interest rates and global risks (measured by the volatility index of options prices on the Chicago Board Options Exchange, Volatility index - VIX), along with other domestic factors, including short-term interest rates, output growth, and inflation.

Similar to Filardo & ctg (2016) and Jain – Chandra & Unsal (2014), the research model is presented with two groups of variables including a group of domestic factors as endogenous variables and a group of external factors as exogenous variables, denoted as follows:

𝑌 𝑡 = 𝑓(𝑌 1,𝑡 , 𝑌 2,𝑡 ) (1.2)

The factors are represented in two groups as follows:

𝑌 1,𝑡 = 𝑓(I_VN_ON, I_VN_10Y, IP, IF) and 𝑌 2,𝑡 = 𝑓(I_US_10Y, VIX) (1.3)

In which Y 1,t and Y 2,t represent the group of domestic factors and the group of external factors, respectively. The group of domestic factors includes I_VN_ON, I_VN_10Y, IP, IF, which are the short-term interest rate, long-term interest rate, change in output growth and change in inflation in Vietnam, respectively. The group of external factors includes I_US_10Y, VIX, which are the US long-term interest rate and global risk, respectively.

The measurement results are determined through considering the reaction function and the variance decomposition results of Vietnam's long-term interest rate variable according to the shocks of domestic variables and external variables.

To achieve the third research objective , the thesis uses the method of analysis, comparison and synthesis to select suitable solutions for the process of financial integration and monetary policy management in Vietnam in the context of increasing financial globalization as an inevitable trend.

Research data

Data are collected at quarterly frequency for the research content corresponding to the first objective in the period 2009Q1 – 2019Q2 and monthly frequency to meet the second research objective in the period 2009M1 – 2019M8. For interest rate and exchange rate data, the frequency of data is collected on a daily basis to calculate correlation and standard deviation by quarter.

Data is drawn from reliable sources around the world, including the International Financial Statistics (IFS) of the International Monetary Fund (IMF), the Global Economic Monitor (GEM) of the World Bank (WB), the Asia Regional Integration Center (ARIC) of the Asian Development Bank (ADB), the Datastream data source of Thompson Reuters, the

Chicago Board Options Exchange; and domestically, including the General Statistics Office and the State Bank of Vietnam (SBV).

1.7 CONTRIBUTIONS OF THE THESIS

Academically

Firstly , the thesis synthesizes financial integration measures and clarifies the measure based on actual results - the measure based on quantity, thereby providing a basis for assessing the level of real financial integration of Vietnam. Studies on Vietnam's financial integration to date mainly use financial integration measures based on legal regulations, few studies measure based on actual results, and at the same time have not paid attention to assessing the differences between measures to choose and give detailed results for the Vietnamese economy.

Second , the thesis synthesizes and clarifies the theory on the impact of financial integration on monetary policy independence, from the general model showing the equilibrium in the two markets of goods and money in a closed economy - the IS-LM model to the special case of equilibrium achieved when international capital flows are freely mobile - the Mundell - Fleming model and in more detail when considering specific exchange rate mechanisms - the Impossible Trinity theory. In addition, through examining the two stages of monetary policy transmission, the thesis clarifies the impact of financial integration on the transmission process in the first stage. Along with the increase in the level of real financial integration, large capital inflows lead to changes in monetary policy and external risks affecting the domestic monetary policy transmission intermediary, thereby affecting the results of the country's monetary policy management.

In practice

Firstly , the thesis supplements the results of measuring the level of financial integration in Vietnam based on actual results, updated to the end of 2019. As the previous research outline, there has not been any research on calculating this index for Vietnam updated to the current period. In addition, the thesis also compares to show the difference when measuring financial integration based on actual results, showing the continuous increase and change over time.

years while the financial integration measured based on legal regulations (KAOPEN index) remained constant throughout the study period.

Second , the thesis adds empirical evidence on the impact of financial integration on monetary policy independence in Vietnam. A review of previous studies in Vietnam has not found any studies clarifying this impact. The research results of the thesis show that financial integration has a negative impact on monetary policy independence in the short term. This empirical evidence will help assess the impact of financial integration as well as have appropriate monetary policy management directions in the context of increasing financial globalization.

Third , the thesis clarifies the role of external factors in the transmission of Vietnam's monetary policy in the context of financial integration. In particular, the thesis evaluates in detail the direction and level of explanation of external factors including US long-term interest rates and a factor that has not been mentioned in the study for the transmission of Vietnam's monetary policy, which is global risk (VIX). The empirical results show that external factors are gradually increasing their role in the changes of Vietnam's long-term interest rates while the role of domestic factors is gradually decreasing. This evidence is the basis for the process of monetary policy management to increase the effectiveness of achieving the ultimate goal in the context of financial globalization.

Fourth , the research period was updated after the 2008-2009 global financial crisis, so structural breaks that affect the accuracy of measurement coefficients can be avoided.

1.8 STRUCTURE OF THESIS

Chapter 1 clearly states the research rationale, research problem, objectives, objects, scope of research, methods, data, main contributions and structure of the thesis.

Chapter 2 presents the theoretical framework of financial integration, monetary policy, the impact and the effects of financial integration on monetary policy under the conditions of financial integration. At the same time, through a review of previous studies on measuring the impact of financial integration on monetary policy independence, external factors

The study points out the gaps that affect the transmission of monetary policy of countries around the world and Vietnam as a basis for choosing models, methods and conducting research.

Chapter 3 presents in detail the implementation process, research model, selection of estimation method and data processing process, on which the experiments are conducted and the results are presented in the next chapter. The calculation method of variables and data sources are also clarified in this chapter.

Chapter 4 presents the results of measuring the actual level of financial integration in Vietnam, the impact of financial integration on the independence of Vietnam's monetary policy, the role of external factors in the transmission of Vietnam's monetary policy under the conditions of financial integration. Through reviewing the process of financial integration and monetary policy management in Vietnam, comparing the research results with previous related studies, and discussing the research results will be mentioned at the end of the chapter.

Chapter 5 summarizes the research problem, objectives and research methods. The research results are also summarized to serve as a basis for suggesting solutions for the financial integration process and monetary policy management in Vietnam in the context of increasing financial globalization as an inevitable trend.

CONCLUSION OF CHAPTER 1

In chapter 1, the thesis has introduced an overview of the research rationale, research problem, objectives, research questions, research objects and scope, research methods, data and summarized the research contributions. In addition, the structure of the thesis is also briefly presented in this chapter.

THEORETICAL AND EXPERIMENTAL RESEARCH

Chapter 2 will present the theoretical framework on financial integration, monetary policy, the impact of financial integration on monetary policy independence, and monetary policy transmission under financial integration conditions. At the same time, through a review of previous studies on measuring the impact of financial integration on monetary policy independence and monetary policy transmission under financial integration conditions in countries and Vietnam, the thesis points out the gap as a basis for selecting models, methods, and conducting research in the next chapter.

2.1 FINANCIAL INTEGRATION

2.1.1 Concept of financial integration

Financial integration (FI) and financial globalization are closely related concepts. Financial globalization is a general concept that refers to the increase in global linkages through financial flows between countries. Meanwhile, financial integration refers to the linkage of a specific country with the international capital market. To promote globalization, it is necessary to increase financial integration in countries around the world (Prasad & ctg 2003). In more detail, Brouwer (2005) argues that financial integration is the process through which financial markets in an economy are linked with financial markets in other economies or with the world market. This is also understood as the increase in international capital flows and the trend towards equalization of prices and incomes of financial assets traded in different countries. Similarly, according to Pongsaparn & Unteroberdoerster (2011), international financial integration includes the opening of domestic financial markets, free movement of capital across borders and integration of financial services. International financial integration can be understood as the opening of domestic financial systems such as financial markets, financial institutions and banking systems to the world and the internationalization of a country's financial assets and liabilities (Mougani 2012).

In this thesis, the concepts of international financial integration or international financial integration and financial globalization are used interchangeably similar to Prasad & ctg (2003), Brouwer (2005), Pongsaparn & Unteroberdoerster (2011) and Mougani (2012). Accordingly, international financial integration refers to a country's linkage with international financial markets, thereby increasing financial flows between countries and the size of that country's financial assets/liabilities.

According to the view of supporting HNTC, this process is an inevitable step on the path of national development and therefore must be accepted. With this view, Fischer (1998) argues that free capital movement will encourage the rational allocation of global savings and help the most efficient use of world resources, thus promoting economic growth and social benefits in countries. In particular, HNTC can help developing countries gain better access to world financial markets, enhance understanding and application of advanced techniques from other countries through the form of technology transfer, develop domestic financial sectors with the participation of foreign banks, create incentives to improve supervision, strengthen market discipline and macroeconomic policy consistency (Prasad et al. 2003).

However, many theoretical studies have found that globalized financial markets are prone to chaos, are susceptible to negative external influences due to their close linkages, and are prone to hot growth cycles leading to crashes (Davidson 2002 and Rodrik 1998). On the other hand, empirical studies have not found strong evidence for the relationship between HNTC and economic growth, while the relationship with crises is quite clear. Therefore, although HNTC is in principle necessary for the economic growth of a country, not all developing countries always fully enjoy these potential benefits. In many cases, HNTC is also accompanied by increased volatility and can lead to crises. Free capital flows in developing countries can harm the development of domestic financial systems as macroeconomic fluctuations due to the impact of external capital flows are inherently cyclical (Stiglitz 2000) and

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