Output-inflation Trade-off in the Presence of Foreign Capital: Evidence for Vietnam

On one monthly time-series data set of Vietnam economy over 02/2008–09/2018, the Time-Varying-Coefficient VAR model records that the trade-off between inflation and output growth is mitigated by the foreign capital inflows. The inflation is mostly determined by credit supply growth, while output gro...

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Bibliographic Details
Published in:South Asian journal of macroeconomics and public finance 2021-12, Vol.10 (2), p.179-192
Main Author: Hung, Ly Dai
Format: Article
Language:English
Subjects:
Capital
Economic growth
Foreign investment
Inflation
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Summary:On one monthly time-series data set of Vietnam economy over 02/2008–09/2018, the Time-Varying-Coefficient VAR model records that the trade-off between inflation and output growth is mitigated by the foreign capital inflows. The inflation is mostly determined by credit supply growth, while output growth is largely driven by foreign direct investment (FDI) capital inflows. A monthly increase of FDI by USD 1 billion can raise 1.77% of monthly output growth rate. The result also holds on accounting for exchange rate fluctuation. JEL Classifications: E31, F15, F36, F43
ISSN:2277-9787
2321-0273
DOI:10.1177/2277978720979890