Finance and Development in Vietnam Post Cold War

Abstract

The study provides a deeper understanding of the current role of finance in improving economic development in Vietnam between 1981 and 2019. The study employed the autoregressive distributed lag (ARDL) modelling technique. Based on the long run model estimates, trade openness (TOP) and foreign direct investment (FDI) exert positive but insignificant impact of economic development in Vietnam, while gross capital formation (GFKF) is significant at 10%. Also, exchange rate was found to have negatively influenced economic development, while human development was also important to economic development. This study found that human development and external borrowing is seen to positively impact on economic development in Vietnam. It is recommended that external debt ratio at the threshold of 105% of annual GDP is manageable and beneficial; it is important to attract multinational corporations from developed countries; the government should strengthen and encourage the competitiveness of exports to maintain a sustainable balance with imports and improving the high-quality labor in Vietnam.