A RESEARCH OF MACROECONOMIC INTERRELATIONSHIPS OF VIETNAM IN SHORT-RUN AND LONG-RUN

Abstract

Employing VEC (vector error correction) methodology and using quarterly data over 10 - year period from March 2010 to December 2019, this paper studies the interrelationships among GDP, foreign direct investment FDI, foreign trade, inflation rate, money supply and state investment  in Vietnam. Results of the Johansen cointegration test affirm the presence of a long-run relationship among variables. The analysis of the short-run dynamics shows that state investment and FDI have great impact on GDP growth. On the other hand, GDP growth and inflation rate are two main factors affecting FDI inflow. Furthermore, foreign trade is relied much on FDI and inflation rate appears to play a crucial role in affecting the dynamics of some of the key economic variables. The research emphasizes the need for effective and consistent economic policies to control the rate of inflation and promote sustainable economic growth.