Financial Turbulences in Vietnam’s Emerging Economy: Transformation over 1991-2008 Period

Abstract

This study focuses on substantial changes that characterize the shift of Vietnam’s macroeconomic structures and evolution of micro-structural interaction over an important period of 1991-2008. The results show that these events are completely distinct in terms of (i) Economic nature; (ii) Scale and depth of changes; (iii) Start and end results; and, (iv) Requirement for macroeconomic decisions. The study rejected a suspicion of similarity between the contagion of financial crisis in 1997-98 and economic chaos in the first half of 2008 (starting late 2007). The depth, economic settings of, and interconnection between macro choices and micro decisions have all grown up significantly, partly due to a deeper level of integration of Vietnam into the world’s economy. On the one hand, this phenomenon gives rise to efficiency of macro level policies because the consideration of micro-structural factors within the framework has definitely become increasingly critical. On the other hand, this is a unique opportunity for the macroeconomic mechanism of Vietnam to improve vastly, given the context in which the national economy entered an ever-changing period under pressures of globalization and re-integration. The authors hope to also open up paths for further empirical verifications and to stress on the fact that macro policies will have, from now on, to be decided in line with changing micro-settings, which specify a market economy and decide the degree of success of any macroeconomic choices.

Keywords: Financial system, inflation, economic growth, interest rate, exchange rate

JEL Classification: G10, G18, E22, E31, E44