II Output Performance in Transition
Author:
Mr. Krishna Srinivasan
Search for other papers by Mr. Krishna Srinivasan in
Current site
Google Scholar Close
,
Erich Spitäller https://isni.org/isni/0000000404811396 International Monetary Fund

Search for other papers by Erich Spitäller in
Current site
Google Scholar Close
,
Mr. M. Braulke https://isni.org/isni/0000000404811396 International Monetary Fund

Search for other papers by Mr. M. Braulke in
Current site
Google Scholar Close
,
Mr. Christian B. Mulder
Search for other papers by Mr. Christian B. Mulder in
Current site
Google Scholar Close
,
Mr. Hisanobu Shishido
Search for other papers by Mr. Hisanobu Shishido in
Current site
Google Scholar Close
,
Mr. Kenneth M. Miranda
Search for other papers by Mr. Kenneth M. Miranda in
Current site
Google Scholar Close
,
Mr. John R Dodsworth
Search for other papers by Mr. John R Dodsworth in
Current site
Google Scholar Close
, and
Keon Lee https://isni.org/isni/0000000404811396 International Monetary Fund

Search for other papers by Keon Lee in
Current site
Google Scholar Close
Language:
English
Print Publication Date:
15 Mar 1996
Keywords:
OP; IMF staff estimate; government; balance of payments estimate; loss-making state-owned enterprise sector; FDI commitment; state enterprise sector; staples price; Inflation; Exchange rates; Foreign direct investment; Agricultural sector; Exchange rate policy; Mekong; Asia and Pacific; East Asia; South Asia; Eastern Europe; government policy; price liberalization; production enterprise; state enterprise reform; cement production; Industrial sector; Services sector; Public sector; Production growth

Abstract

One of the most striking features of Vietnam’s transition to a market economy has been the resilience of output. The level of general economic activity never declined; there was only a temporary deceleration in the pace of expansion under the impact of external shocks and fundamental changes in domestic policy. The economy grew at an average annual rate of 6 percent in the transition period of 1988-91, during which comprehensive steps were taken to transform the economy from a command system to a system based on market principles (Box 2.1). These steps included decentralization of decision making, creation of a new incentive structure, and the liberalization of trade, prices, and the exchange rate. The stance of monetary policies was temporarily relaxed in 1990-91 when the economy suffered the collapse of its commercial and financial relationship with the CMEA. Since then, however, financial stabilization has resumed, the reform process has continued, inflation has declined, and the growth of the Vietnamese economy has accelerated to an annual rate of 8-9 percent.1 This picture contrasts sharply with the collapse of output in other transition economies in Eastern Europe and the former U.S.S.R., raising questions about the reasons behind Vietnam’s success. The aim of this section is to explore those reasons in the context of output developments by sector, with an emphasis, first, on the strong supply response to reform policies and the broadly favorable initial supply conditions. The section then considers factors on the demand side, arguing that wage and price flexibility and buoyant exports helped sustain real demand.

Cited By

Within Same Series

Other IMF Content

Other Publishers Content

  • Collapse
  • Expand
Cover Vietnam
Vietnam
Transition to a Market Economy
ISBN:
9781557755384
ISSN:
0251-6365
Publication Date:
15 Mar 1996
Publisher:
International Monetary Fund
DOI:
https://doi.org/10.5089/9781557755384.084
Pages:
72

  • Agenor, Pierre-Richard. 1990a, “Stabilization Policies in Developing Countries with a Parallel Market for Foreign Exchange: A Formal Framework,” Staff Papers, International Monetary Fund, Vol. 37 (September), pp. 560–92.

    • Search Google Scholar
    • Export Citation

  • Agenor, Pierre-Richard. 1990b, “Parallel Currency Markets in Developing Countries: Theory, Evidence, and Policy Implications,” IMF Working Paper 90/114 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Agenor, Pierre-Richard. and Mohsin S. Khan, 1992, “Foreign Currency Deposits and the Demand for Money in Developing Countries,” IMF Working Paper 92/1 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Aghevli, Bijan B., 1992, “Centrally Planned Economies in Transition: An Asian Perspective” (Unpublished; Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Aghevli, Bijan B., Mohsin Khan, and Peter Montiel, 1991, Exchange Rate Policy in Developing Countries: Some Analytical Issues, IMF Occasional Paper No. 78 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Blejer, Mario I., 1978, “Black-Market Exchange-Rate Expectations and the Domestic Demand for Money,” Journal of Monetary Economics, Vol. 4 (November), pp. 767–73.

    • Search Google Scholar
    • Export Citation

  • Bordo, Michael D., Ehsan U. Choudhri, 1982, “Currency Substitution and the Demand for Money: Some Evidence for Canada,” Journal of Money, Credit, and Banking, Vol. 14 (February), pp. 48–57.

    • Search Google Scholar
    • Export Citation

  • Brillembourg, Arturo, and Susan M. Schadler, 1979, “A Model of Currency Substitution in Exchange Rate Determination, 1973-78,” Staff Papers, International Monetary Fund, Vol. 26 (September), pp. 513–42.

    • Search Google Scholar
    • Export Citation

  • Brittain, Bruce, 1981, “International Currency Substitution and the Apparent Instability of Velocity in Some Western European Economies and in the United States,” Journal of Money, Credit, and Banking, Vol. 13 (May), pp. 135–55.

    • Search Google Scholar
    • Export Citation

  • Bruno, Michael, and William Easterly, 1995, “Inflation Crises and Long-Run Growth,” NBER Working Paper No. 5209 (Cambridge, Massachusetts: National Bureau of Economic Research).

    • Search Google Scholar
    • Export Citation

  • Calvo, Guillermo A., and Carlos Alfredo Rodriguez, 1977, “A Model of Exchange Rate Determination under Currency Substitution and Rational Expectations,” Journal of Political Economy, Vol. 85 (June), pp. 617–25.

    • Search Google Scholar
    • Export Citation

  • Calvo, Guillermo, and Carlos Vegh, 1992, “Currency Substitution in Developing Countries: An Introduction,” Revista de Análisis Económico, Vol. 7 (June), pp. 3–27.

    • Search Google Scholar
    • Export Citation

  • Canto, Victor A., 1985, “Monetary Policy, ‘Dollarization,’ and Parallel Market Exchange Rates: The Case of the Dominican Republic,” Journal of International Money and Finance, Vol. 4 (December), pp. 507–21.

    • Search Google Scholar
    • Export Citation

  • Cuddington, John T., 1983, “Currency Substitution, Capital Mobility, and Money Demand,” Journal of International Money and Finance, Vol. 2 (August), pp. 111–33.

    • Search Google Scholar
    • Export Citation

  • Dodsworth, J.R., M.A. El-Erian, and D. Hammann, 1987, “Foreign Currency Deposits in Developing Countries—Origins and Economic Implications,” IMF Working Paper 87/12 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Due, Ngo Huy, 1995, “Currency Substitution in a Developing Economy with Special Reference to Vietnam” (Unpublished; Canberra: Australian National University, National Centre for Development Studies).

    • Search Google Scholar
    • Export Citation

  • Edwards, Sebastian, 1989, Real Exchange Rates, Devaluation, and Adjustment: Exchange Rate Policy in Developing Countries (Cambridge, Massachusetts: MIT Press).

    • Search Google Scholar
    • Export Citation

  • Eken, Sena, and others, 1995, Economic Dislocation and Recovery in Lebanon, Occasional Paper No. 120 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • El-Erian, Mohamed, 1988, “Currency Substitution in Egypt and the Yemen Arab Republic: A Comparative Qualitative Analysis,” Staff Papers International Monetary Fund, Vol. 35 (March), pp. 85–103.

    • Search Google Scholar
    • Export Citation

  • Far Eastern Economic Review, 1995, “Ding Dong Dollar” (March 30), p. 5.

  • Fasano-Filho, Ugo, 1986, “Currency Substitution and the Demand for Money: The Argentine Case, 1960-1976,” Weltwirtschaftliches Archiv, Vol. 122, pp. 327–39.

    • Search Google Scholar
    • Export Citation

  • Fischer, Stanley, 1982, “Seigniorage and the Case for a National Money,” Journal of Political Economy, Vol. 90 (April), pp. 295–313.

    • Search Google Scholar
    • Export Citation

  • Girton, Lance. Roper, Don 1981, “Theory and Implications of Currency Substitution,” Journal of Money, Credit, and Banking, Vol. 13 (February), pp. 12–30.

    • Search Google Scholar
    • Export Citation

  • Guidotti, Pablo E., and Carlos A. Rodriguez, 1992, “Dollarization in Latin America: Gresham’s Law in Reverse?” Staff Papers, International Monetary Fund, Vol. 39 (September), pp. 518–44.

    • Search Google Scholar
    • Export Citation

  • International Currency Analysis, Inc., World Currency Yearbook (Brooklyn, New York: International Currency Analysis, Inc.), various issues.

    • Search Google Scholar
    • Export Citation

  • Joines, Douglas H., 1985, “International Currency Substitution and the Income Velocity of Money,” Journal of International Money and Finance, Vol. 4 (September), pp. 303–16.

    • Search Google Scholar
    • Export Citation

  • Kamin, Steven B., 1991, Argentina’s Experience with Parallel Exchange Markets, 1981-1990 (Washington: Board of Governors of the Federal Reserve System).

    • Search Google Scholar
    • Export Citation

  • ———, 1993, “Devaluation, Exchange Controls, and Black Markets for Foreign Exchange in Developing Countries,” Journal of Development Economics, Vol. 40 (February), pp. 151–69.

    • Search Google Scholar
    • Export Citation

  • Kiguel, Miguel A., and Stephen A. O’Connell, 1994, Parallel Exchange Rates in Developing Countries: Lessons from Eight Case Studies, World Bank Policy Research Working Paper No. 1265 (Washington: World Bank).

    • Search Google Scholar
    • Export Citation

  • Kim, Tran Hoang, 1994, “Economy of Viet Nam, Reviews and Statistics” (Hanoi: Statistical Publishing House).

  • Krueger, Russell, and Jiming Ha, 1995, “Measurement of Co-circulation of Currencies,” IMF Working Paper 95/34 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Lee, Keon H., 1992, “Bangladesh: Issues in Exchange Rate Policy” (Unpublished; Washington: International Monetary Fund).

  • Lipton, David, and Jeffrey Sachs, 1990, “Creating a Market Economy in Eastern Europe: The Case of Poland,” Brookings Papers on Economic Activity:I, Brookings Institution, pp. 75–147.

    • Search Google Scholar
    • Export Citation

  • Lipworth, Gabrielle, Erich Spitäller, 1993, “Viet Nam—Reform and Stabilization, 1986-92,” IMF Working Paper 93/46 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Milanovic, Branko, 1989, Liberalization and Entrepreneurship: Dynamics of Reform in Socialism and Capitalism (Armonk, N.Y.: M.E. Sharpe, Inc.).

    • Search Google Scholar
    • Export Citation

  • Miles, Marc A., 1978, “Currency Substitution, Flexible Exchange Rates, and Monetary Independence,” American Economic Review, Vol. 68 (June), pp. 428–36.

    • Search Google Scholar
    • Export Citation

  • Montiel, Peter J., Pierre-Richard Agenor, and Nadeem Ul Haque, 1993, Informal Financial Markets in Developing Countries: A Macroeconomic Analysis (Cambridge, Massachusetts: Blackwell).

    • Search Google Scholar
    • Export Citation

  • Montiel, Peter J., and Jonathan Ostry, 1994, “Parallel Market Premium: Is It a Reliable Indicator of Real Exchange Rate Misalignment in Developing Countries?” Staff Papers, International Monetary Fund, Vol. 41 (March), pp. 55–75.

    • Search Google Scholar
    • Export Citation

  • Mueller, Johannes, 1994, “Dollarization in Lebanon,” IMF Working Paper 94/129 (Washington: International Monetary Fund).

  • Ortiz, Guillermo, 1983, “Dollarization in Mexico: Causes and Consequences,” in Financial Policies and the World Capital Market: The Problem of Latin American Countries, Pedro Aspe Armella, Dornbusch, Rudiger Obstfeld Maurice (Chicago: University of Chicago Press).

    • Search Google Scholar
    • Export Citation

  • Pinto, Brian, 1991, “Black Markets for Foreign Exchange, Real Exchange Rates and Inflation,” Journal of International Economics, Vol. 30 (February), pp. 121–35.

    • Search Google Scholar
    • Export Citation

  • Quirk, Peter J., and others, 1987, Floating Exchange Rates in Developing Countries: Experience with Auction and Interbank Markets, IMF Occasional Paper No. 53 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Ramirez-Rojas, C.L., 1985, “Currency Substitution in Argentina, Mexico, and Uruguay,” Staff Papers, International Monetary Fund, Vol. 32 (December), pp. 629–67.

    • Search Google Scholar
    • Export Citation

  • Ronnas, Per, and Orjan Sjoberg, 1991, Socio-Economic Development in Vietnam: The Agenda for the 1990s, Swedish International Development Authority.

    • Search Google Scholar
    • Export Citation

  • Sachs, Jeffrey, 1993, Poland’s Jump to the Market Economy (Cambridge, Massachusetts: MIT Press).

  • Sahay, Ratna, and Carlos A. Végh, 1995a, “Dollarization in Transition Economies, Finance and Development, Vol. 32 (March), pp. 36–39.

    • Search Google Scholar
    • Export Citation

  • Sahay, Ratna, and Carlos A. Végh, 1995b, “Inflation and Stabilization in Transition Economies: A Comparison with Market Economies,” IMF Working Paper 95/8 (Washington: International Monetary Fund).

    • Search Google Scholar
    • Export Citation

  • Savastano, Miguel A., 1992, “The Pattern of Currency Substitution in Latin America: An Overview,” Revista de Andlisis Economico, Vol. 7 (June), pp. 29–72.

    • Search Google Scholar
    • Export Citation

  • Sheikh, Munir A., 1976, “Black Market for Foreign Exchange, Capital Flows, and Smuggling,” Journal of Development Economics, Vol. 3, pp. 9–26.

    • Search Google Scholar
    • Export Citation

  • Sturzenegger, Frederico, 1992,“Currency Substitution and the Regressivity of Inflationary Taxation,” Revista de Andlisis Economico, Vol. 7 (June), pp. 177–92.

    • Search Google Scholar
    • Export Citation

  • Tanzi, Vito, and Mario I. Blejer, 1982, “Inflation, Interest Rate Policy, and Currency Substitutions in Developing Economies: A Discussion of Some Major Issues,” World Development, Vol. 10 (September), pp. 781–89.

    • Search Google Scholar
    • Export Citation

  • Végh, Carlos A., 1989, “The Optimal Inflation Tax in the Presence of Currency Substitution,” Journal of Monetary Economics, Vol. 24 (July), pp. 139–46.

    • Search Google Scholar
    • Export Citation

  • World Bank, 1993a, Adjustment in Africa: Reforms, Results, and the Road Ahead, World Bank Policy Research Report (Washington: World Bank).

    • Search Google Scholar
    • Export Citation

  • ———, 1993b, Viet Nam: Transition to Market (Washington: World Bank).

  • ———, Vietnam: Policies for Transition to an Open Economy, Country Report No. 13 (Washington: World Bank, forthcoming).