Modeling the Open Macro-Economy of Vietnam

The present macroeconomic model aims to provide a theory-consistent representation of the general structure of the Viet Nam economy and, as such, it offers real and financial sector forecasting and policy simulation capabilities targeted to the needs of the State Bank of Viet Nam. The model serves a dual purpose. First, it provides a framework for making rational and consistent predictions about Viet Nam's overall economic activity, the standard components of the balance of payments, and the production and expenditure concepts of the national accounts. Secondly, it offers a means of quantitatively evaluating the impact of exchange rate policies and other policy changes on the Vietnamese economy, and assessing the feedback effects that changes in key macroeconomic variables of the economy produce in other sectors. The modeling procedure has sought to account for the structure of the Viet Nam economy, the availability of data, and the degree of stability of time-series estimates of parameters during the country's transition process. The present model therefore aims to provide a mechanism to link policies and targets while, at the same time, providing an easy and adaptable means of both forecasting key macroeconomic variables and simulating the interrelationships between economic policy initiatives.