Effect of Interest Rate Subsidies on Firm Performance and Investment Behavior During Economic Recession: Evidence from Vietnam

Asian Economic Journal, 27: 185–207, 2013, doi: 10.1111/asej.12009

23 Pages Posted: 30 Sep 2013

See all articles by Tuan Dinh

Tuan Dinh

Vietnam National University (VNU) - Vietnam Centre for Economic and Policy Research

Edmund J. Malesky

Duke University, Political Science

Trung-Thanh To

National Economics University, Hanoi, Vietnam

Duc-Thanh Nguyen

Vietnam National University (VNU) - Vietnam Centre for Economic and Policy Research

Date Written: December 1, 2012

Abstract

This paper aims to quantitatively evaluate the microeconomic consequences of the 4-percent interest rate subsidy program, the main component of the Vietnamese Government’s economic stimulus package in 2009, which was intended to assist recovery from the global economic and financial recession. Our analyses based on the Provincial Competitive Index 2009 survey and accounting data of firms listed on Vietnam’s two stock exchanges show that firms that received subsidized loans were more likely to increase labor, to expand investment and to possess optimistic business plans. However, we find evidence that not all business activity generated by the stimulus led to productivity increases: a non-trivial proportion of subsidized loans were not used to invest in production or expansion, but for speculative activities such as real estate and stock market trading.

Keywords: interest rate subsidy, firm performances, firm investment behavior, Vietnamese economy

JEL Classification: E65, H25, D21, C25

Suggested Citation

Dinh, Tuan and Malesky, Edmund J. and To, Trung-Thanh and Nguyen, Duc-Thanh, Effect of Interest Rate Subsidies on Firm Performance and Investment Behavior During Economic Recession: Evidence from Vietnam (December 1, 2012). Asian Economic Journal, 27: 185–207, 2013, doi: 10.1111/asej.12009. Available at SSRN: https://ssrn.com/abstract=2333322

Tuan Dinh

Vietnam National University (VNU) - Vietnam Centre for Economic and Policy Research ( email )

Building E4, 144 Xuan Thuy Street, Cau Giay
Hanoi
Vietnam

Edmund J. Malesky (Contact Author)

Duke University, Political Science ( email )

140 Science Drive (Gross Hall), 2nd floor
Duke University Mailcode: 90204
Durham, NC 27708-0204
United States

Trung-Thanh To

National Economics University, Hanoi, Vietnam ( email )

207 Giai Phong Street
Hanoi
Vietnam

Duc-Thanh Nguyen

Vietnam National University (VNU) - Vietnam Centre for Economic and Policy Research ( email )

Building E4, 144 Xuan Thuy Street, Cau Giay
Hanoi
Vietnam

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