FISCAL DEFICITS AND GROWTH IN VIETNAM: RETHINKING THE TRADE-OFF IN A TRANSITIONAL ECONOMY
DOI:
https://doi.org/10.18623/rvd.v22.n2.3235Keywords:
Fiscal Deficit, Economic Growth, VECM Model, Current Account BalanceAbstract
This study explores the relationship between fiscal deficits and economic growth in Vietnam over the period 2000-2024. Drawing on modern macroeconomic theory and prior empirical research, the analysis employs a Vector Error Correction Model (VECM) using time series data from the World Bank to examine how fiscal deficits and current account balances affect real GDP growth. The results indicate a long-run cointegration among the variables, suggesting a stable equilibrium relationship. In the short run, fiscal deficits exert a negative influence on economic growth, although the effect is statistically insignificant. In the long run, fiscal deficits appear to have no measurable impact on growth, challenging conventional views on the deficit-growth trade-off in transitional economies. Based on these findings, the study recommends strengthening fiscal discipline, improving the efficiency of public expenditure, and adopting policies that promote sustainable economic development. The research contributes to the broader discourse on fiscal sustainability and offers practical insights for policymakers navigating Vietnam’s evolving economic landscape.
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