Econometric Model Analysis about Economic Growth in Vietnam

The Influence of Reformation Policy and Overseas Assistance Fund

Abstract

Recently, economic growth is improving in Vietnam. Many people in the world pay attention to this powerful economic performance. The purpose of this paper is to analyse whether the economic reformation and overseas assistance fund is valid for economic development and whether such an economic growth will continue or not. For this purpose, I specify an econometric model and simulate the various situations in the future. The results are as follows.
Firstly, macro-economic structure is restricted by a supply side factor. If saying with an other word, there is some restriction in production, capital formation and trade. It is useful to put into effect the economic reformation and the overseas assistance fund for relieving this restriction. Especially the cost-benefit ratio of foreign assistance fund is expected to 2.5 in 1980's and 2.6 in 1990's.
Secondly, with these economic reformation and the overseas assistance fund, the production of manufacturing and service industry move up rapidly. But the growth rate of agriculture get lower compared with other industry. In Vietnam, agriculture is a principal industry in the rural district. And manufacturing and service industry is mainly located in the city. Consequently, economic reformation and the overseas assistance fund magnify an economic differentials between rural area and cities.
Finally, the population policy is also important. An increase of population brings about an increase of Gross Domestic Product. However, the growth rate of per capita GDP become negative, because increase rate of population is higher than that of total GDP. Similarly, consumption per person, welfare index, employment rate are also decreased under the high population pressure.