Vietnam’s Balance of Payments: A Monetary Approach

Abstract

This paper examines the balance of payment in Vietnam during the period 1993-2011 by using the monetary approach. Through the conventional equation, it tests whether any excess money supply plays an important role in disturbance the balance of payments. Empirical results show that monetary variables do take a significant part in determining Vietnam’s balance of payments during this period. Positive relationships were found between the gross domestic product growth, general price growth and net foreign assets. Negative relationships were also discovered between net domestic assets, statutory reserves of commercial banks and net foreign assets. Empirical results also suggest that these monetary variables play significant role in determining the balance of payments, hence the dis-equilibrium of balance of payments should be mainly corrected based on monetary authorities’ actions.