Macroeconomic essays on Vietnam economy

Abstract

The dissertation is structured into four chapters (Chapters 2 to 5) corresponding to four independently empirical papers. Together, these provide a panoramic view of Vietnam’s economy from various standpoints. The first and last of these empirical works investigate the cyclicality of the Vietnamese economy, using dynamic stochastic general equilibrium (DSGE) models with neoclassical economic theory at their cores. The second study, Chapter 3, aims to explain how global demand and oil price shocks impact on Vietnam’s macroeconomic conditions and monetary policy responses. Chapter 4 acts as a complement to the DSGE analysis of public expenditures conducted in chapter 5. This chapter also validates Aschauer’s (1989a, b) hypothesis on the crowding-in effect of public investment and public capital on Vietnam economy. Chapter 1: Introduction Chapter 2: Growth and Real Business Cycles in Vietnam and the Asean-5. Does the trend shock matter This chapter explores the influence of government expenditures on the business cycle dynamics of a transition country such as Vietnam. I develop a stochastic-growth DSGE/RBC model based on Leeper et al (2010a; 2010b), with notable features such as government consumption in utility, internal habit persistence in consumption, private capital utilisation, and consideration of two fiscal shocks in addition to shocks to household preferences and technological progress. The estimated DSGE model adequately captures the dynamics of Vietnam’s economy and is helpful to uncover a diversity of findings. First, public investment has been an important driver of Vietnam’s high output growth in the early-to-mid 1990s, although its contribution decreased during the 2000s. Second, government expenditures explain up to 30% and 20% of Vietnamese output variations in the long and short run, respectively. Third, impulse–response functions reveal a 3% GDP cumulative five-year gain from a public investment shock of 1% GDP. Fourth, simulation analysis uncovers a significant and positive impact of productive public investment by crowding in private investment. Chapter 3: The macroeconomic effects of oil price and risk premium shocks on Vietnam –Evidence from an over-identifying SVAR analysis This chapter studies the macroeconomic effects of oil price shocks in Vietnam. It expands Kilian’s (2009) framework to simultaneously consider risk-premium shocks and comprehensively assess their consequences on international competitiveness and the State Bank management of the monetary policy. Chapter 4: Crowding-in or Crowding-out macroeconomic effect of public investment in Vietnam? By considering a regime switch in two structural vector error correction models (SVECMs) over the period 1976 - 2015, I plot the significant influence of Vietnam’s public capital spending and public capital stock on private capital accumulation and output growth. Private investment, however, plays a significant role in explaining variations in the employment. These findings highlight the growth effects of public capital in Vietnam during its transitional phase. Chapter 5: Implications of public expenditures on Vietnam economy In this chapter, I develop a stochastic-growth DSGE/RBC model based on Leeper et al (2010a; 2010b), with notable features such as government consumption in utility, internal habit persistence in consumption, private capital utilisation, and consideration of two fiscal shocks in addition to shocks to household preferences and technological progress.