Fiscal Stimulus: Government Expenditure in Vietnam in 2008 – 2009

Topics: Public finance, Keynesian economics, Gross domestic product Pages: 15 (4626 words) Published: October 23, 2012
Cohort 2

MBA510 Group Assignment
Fiscal Stimulus
“Government Expenditure in Vietnam
in 2008 – 2009 Period”

| Instructor: Ha Thi Thieu Dao PhD|
| | |
| Group 1:| |
| Vo Ngan Tho| ID: 2192004|
| Nguyen Tan Phat| ID: 2191727|
| Vo Dang Nguyen| ID: 2191835|
| Ho Chi Thong| ID: 2191832|
| Tran Thi Phi Oanh| ID: 2191831|
| Dinh Thi Thu Hue| ID: 2192629|
| Lam Quoc Cuong| ID: 2191818|

December 25th, 2011

This article will attempt to provide an overview of the effectiveness of public investment policy (government spending) in Vietnam for the economy. A lot more aspects of efficiency and of particularly disadvantages in government spending on the national economy will be also illustrated herein.

Theoretical review1
Literature review1
Empirical evidence4
Vietnamese economy – applying various fiscal policies over time4
Stimulus Package of Vietnamese Government in 2008-2009 period5
Keeping GDP growth purpose: effective in short-term5

In a rapidly developed society, such as Vietnam, the economy has always played a significant role in the national economy, especially for those business areas of national strength. The tendency of a weird growth happening in any economy is inevitable. Therefore, every country tries to outline a strategy for its own development purposes depending on the local conditions. Accordingly, the question posed here is how the government can intervene effectively into its country’s economy. For the short term, the government has to immediately stabilize and control the economy through policies. Furthermore, these policies must "steer the boat" in the appropriate direction based on the situation. Government expenditure policy is one of the most important tools in economy of Vietnam nowadays. In order to have effective expanding or tightening investment, the government need to have a particular view about the economy, to understand the situation, and to set the priority for the entire nation. Then, the fiscal policies would play their crucial roles. In this article, we will carry out this research and try to find possible solutions of how to minimize the negative aspects and enhance the efficiency of government investment. Hopefully this will bring a fresh perspective on the topic and help you, who desire to accelerate economy growth, make people more progressive, or at least directing favorite businesses better responding to changes in the general economic trend. CONTENT

This article mainly uses desk research method which is gathering and analyzing information available in print or published on the Internet ( Theoretical review
Literature review
What is fiscal policy and Fiscal Stimulus?
Based on the AD/AS model depicted in formula 1, aggregate demand consists of four components: Consumption (C), Investment (I), Government spending (G), and Net exports (X-M). AD=C+I+G+(X-M) (1)
Keynes (1936) determined in his theory about the equilibrium GDP which is the value of total output (real GDP) produced at macro equilibrium (AS = AD). In this theory, Keynes emphasized the importance of government to regulate the economy. Fiscal policy therefore is the use of government taxes and spending to alter macroeconomic outcomes (The Macro Economy Today, 2010, p. 226) Fiscal policy with a focus on fiscal stimulus is this paper’s target. Thus, what is fiscal stimulus? And why is it important? When there is a discriminated recession in the GDP gap of the economy, the state will use fiscal stimulus, in which the following tools are enacted: increasing government spending (both public investment and transfer), together with cutting taxes in order to shift the AD curve to the right. Conversely,...
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