Abstract
The article examines the relationship between external debt, economic growth, unemployment and national expenditure in Viet Nam between 1987 and 2016. We found that the influence of a variable on other variables varies in the short run. We found that there are directional relationships between GDP and external debt and GDP and national expenditure. We also found that there are directional relationships between unemployment and external debt, GDP, and national expenditure. Results addressed directional relationships between national expenditure and external debt and GDP. There are two co-integrations among variables. In order to sustain macroeconomic stability in Viet Nam, fiscal policy should be re-examined to meet large development needs and monetary policy should be tightened to reduce credit growth. Specifically, external debt should be effectively managed by the government because an increase in external debt leads to a decrease in GDP and a growth of unemployment. Moreover, GDP should be facilitated to reduce unemployment in the economy. Lastly, unemployment needs to be controlled because it generates a boom of national expenditure and vice versa.
Highlights
With the average growth by 6.5 percent over the period 2000–2016, Viet Nam’s economy has been known as the most dynamic in East Asia
We found that the influence of a variable on other variables varies in the short run
We found that there are directional relationships between gross domestic product (GDP) and external debt and GDP and national expenditure
Summary
With the average growth by 6.5 percent over the period 2000–2016, Viet Nam’s economy has been known as the most dynamic in East Asia. This is a result of an expansion in exports in addition to stable macroeconomics (IMF, 2018). This country must face economic obstacles such as macroeconomic and financial vulnerabilities and the increase of asset prices and ignite inflationary effects due to rapid monetary expansion (World Bank, 2016). Most of the debt of Viet Nam is public debt and by 2015, public debt accounted for 58.3 percent of GDP of this country (IMF, 2016). In the last a decade, external debt of Viet Nam tended to increase continuously (Dao and Oanh, 2017)
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