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Macroeconomic Adjustment in a Transition Economy: the Case of Vietnam

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Macroeconomic Adjustment in a Transition Economy: the Case of Vietnam University of Wollongong Research Online University of Wollongong Thesis Collection 1954-2016 University of Wollongong Thesis Collections 2003 Macroeconomic adjustment in a transition economy: the case of Vietnam Thi Nhiem Phan University of Wollongong Follow this and additional works at: https://ro.uow.edu.au/theses University of Wollongong Copyright Warning You may print or download ONE copy of this document for the purpose of your own research or study. The University does not authorise you to copy, communicate or otherwise make available electronically to any other person any copyright material contained on this site. You are reminded of the following: This work is copyright. Apart from any use permitted under the Copyright Act 1968, no part of this work may be reproduced by any process, nor may any other exclusive right be exercised, without the permission of the author. Copyright owners are entitled to take legal action against persons who infringe their copyright. A reproduction of material that is protected by copyright may be a copyright infringement. A court may impose penalties and award damages in relation to offences and infringements relating to copyright material. Higher penalties may apply, and higher damages may be awarded, for offences and infringements involving the conversion of material into digital or electronic form. Unless otherwise indicated, the views expressed in this thesis are those of the author and do not necessarily represent the views of the University of Wollongong. Recommended Citation Phan, Thi Nhiem, Macroeconomic adjustment in a transition economy: the case of Vietnam, PhD thesis, School of Economics and Information Systems, University of Wollongong, 2003. http://ro.uow.edu.au/ theses/294 Research Online is the open access institutional repository for the University of Wollongong. For further information contact the UOW Library: [email protected] MACROECONOMIC ADJUSTMENT IN A TRANSITION ECONOMY: THE CASE OF VIETNAM This thesis is submitted in fulfilment of the Requirements for the award of the degree DOCTOR OF PHILOSOPHY from UNIVERSITY OF WOLLONGONG by PHAN THI NHIEM BA (Economics) (National Economic University, Hanoi, Vietnam) MBA (Boise State University, Idaho, USA) SCHOOL OF ECONOMICS AND INFORMATION SYSTEMS FACULTY OF COMMERCE UNIVERSITY OF WOLLONGONG, AUSTRALIA 2003 ii ACKNOWLEGEMENT I would like to express my gratitude to a number of individuals and institutions who have given support and encouragement during four years it has taken me to complete this thesis. I am particularly indebted to my first supervisor, Ass. Professor Charles Harvie, whose knowledge and help was very essential in guiding me in the right direction. His continual supports, criticisms, comments, and encouragement were instrumental in developing the depth of knowledge necessary to understand about transition economies and theoretical context applied in this thesis. In addition for his careful reading, perceptive commenting on the various drafts, enthusiasm over the period of researching and writing the thesis have helped me to strive completing my thesis. To Ass. Professor Tran Van Hoa, my second supervisor, I would like to express my indebtedness for the academic guidance he gave to me, especially his comments and suggestions on the economic development of Vietnam during the transition process and econometrics methodology. I would also like to thank Dr. Elias Sanidas, my third supervisor, who gave me a number of comments on the empirical estimation and the structure of the thesis. I gratefully acknowledge the financial support provided by AusAID, without which this study would not have been possible. I would like to thank Ms. Therese Philippa, AusAID Liaison Officer, University of Wollongong, who gave me much support during my study period. I also would like to express my appreciation to a number of individuals who have supported me in various stages of this study. In the data gathering stage, I greatly benefited from the help of Dr. Vo Chi Thanh, the head of the macroeconomic policy analysis department, Central Institute for Economic Management (CIEM), whose extensive knowledge about macroeconometric model of Vietnam. I would like to thank Professor Vu Thi Ngoc Phung, Ass. Professor Pham Van Van, Dr. Nguyen Thi Kim Dung, Dr. Ngo Thang Loi, and my colleagues in the Economics Department, the National Economics University , Hanoi, Vietnam for their valuable helps. I also wish to extend my thankfulness to my old Australian friends, Mrs. and Mr. Samaras, for the continual encouragement and thoughtfulness they extended to my family and me. I am also indebted to my Vietnamese friends here. My special thanks go to Long, Cuong, Cong, who helped me to solve many problems relating to mathematics, and computer software programs. My mother, my parents-in-law and their family are also gratefully acknowledged. Their invaluable love, caring, and support has enabled me to maintain my work during the hardest period of studying in Australia. iii Last but not least, I owe a debt of great gratitude to my loving husband, Chu Thanh, my daughter, Thuy Duong, and my son Chu Thang, for their understanding, patience and moral support. TABLE OF CONTENTS CHAPTER 1 INTRODUCTION.................................................................................. 1 1.1 Overview and Issues To Be Addressed.................................................... 1 1.2 Objectives and Scope of the Thesis.......................................................... 5 1.3 Study Methodology.................................................................................. 6 iv Data sources.............................................................................. 6 Method of study......................................................................... 7 Estimation of the model............................................................. 9 Simulation of the model............................................................ 10 1.4 Organisation of the Study........................................................................ 11 CHAPTER 2 LITERATURE REVIEW OF TRANSITION ECONOMIES........... 13 2.1 Introduction.................................................................... .......................... 13 2.2 Collapse of Centrally Planned Economies (CPEs)................................... 15 2.3 Economic Transition................................................................................. 19 Elements of reform..................................................................... 22 Sequencing of reform................................................................. 26 Speed of reform – “Big Bang” vs. “Gradualism”.................... 31 2.4 Economic Progress After a Decade of Transformation............................ 35 Macroeconomic performance.................................................... 36 Reasons for the variable performance in the transition economies.................................................................................. 46 2.5 Conclusions.............................................................................................. 52 CHAPTER 3 THE ECONOMY OF VIETNAM......................................................... 54 3.1 Introduction.............................................................................................. 54 3.2 Vietnam’s Macroeconomic Crisis 1976 – 1985....................................... 55 The premises of the Vietnamese macroeconomic crisis............ 56 Doi Moi – The renovation policy response to the crisis............ 64 3.3 The Effect of Reform Policies on Macroeconomic Performance since 1986................................................................................................ 67 Period 1986 – 1989: Economic renovation............................... 67 Period 1990 – 1997: Accelerated structural reform and stabilisation............................................................................... 72 Period 1998 – present: Reform slowdown................................ 80 3.4 Current Problems Facing the Vietnamese Economy................................ 87 v Slow progress of state-owned enterprise reforms..................... 87 Private sector constraints.......................................................... 89 Highly restrictive trade system.................................................. 91 Banking system problems.......................................................... 95 Weak fiscal management........................................................... 96 3.5 Conclusions.............................................................................................. 97 CHAPTER 4 ECONOMIC TRANSITION AND MACROECONOMIC ADJUSTMENT: THEORIES AND EMPIRICAL EVIDENCE......... 100 4.1 Introduction................................................................................................. 100 4.2 Theoretical and Empirical Studies on Macroeconomic Adjustment in Transition Economies................................................................................. 101 Liberalisation............................................................................... 102 Macroeconomic stabilisation....................................................... 106 Privatisation and restructuring of SOEs..................................... 110 Legal and institutional reforms................................................... 112 4.3 Empirical Studies on Vietnam.................................................................... 114 Macroeconomic models of the Vietnamese economy.................
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