Transition, savings and growth in Vietnam: a three-gap analysis

Abstract

This article assesses the significance of domestic and foreign savings for Vietnam's economic growth. Using annual data for the period between 1986 and 2000 a three-gap model is formulated and estimated. The model illustrates quite vividly the centrality of the foreign exchange constraint for Vietnam's economic growth. The domestic private savings constraint is also shown to be more binding than the public savings constraint. The estimates of the foreign exchange requirements under various growth path scenarios over the period 2001–05 suggest that the increase in investment required to boost the growth rate of output results in much higher levels of external debt than that estimated by the World Bank and other donors. Copyright © 2005 John Wiley & Sons, Ltd.

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