Spending multiplier of Vietnam's economy

Abstract

    Since the time global economic crisis pushed the world economy into its worst crisis during 2007-2009, the economic recovery signal has not been clear. Almost all governments in the world are still putting their efforts to intervene in their economies through a number of economic stimulus packages. This paper tries to estimate the magnitude of the spending multiplier of Vietnam's economy. With data collected from the General Statistics Office and the State Bank of Vietnam, the consumption function, investment function, import function and tax functions are estimated, respectively. As a result, the expenditure multiplier of Vietnam's economy is calculated as of 3.29. The paper shows that in order to achieve the target of economic growth of 5.5 percent and the inflation rate of 7 percent in 2013, the government needs to increase its spending, compared with 2012, by approximately VND 110 trillion VND, which is about 13.5 percent higher than that of 2012. Consequently, the government spending will be 9.7 percent higher than that of 2012.