INTERNATIONALIZATION AND MACROECONOMIC MANAGEMENT IN VIETNAM: SOME LESSONS FROM SWEDISH EXPERIENCES

The main macroeconomic challenges at the early stages of Vietnam¡¯s economic reforms were related to stability and growth. The main achievements of Doi Moi are also related to the success in meeting these two challenges: Vietnam has managed to combine high growth with reasonable price stability since the early 1990s. However, meeting these challenges has become more difficult over time as new challenges have emerged. In the mid-1990s, economic structure and external balance entered the policy debate. In the late 1990s, the Asian crisis created further problems. In recent years, issues related to social and regional development gaps and investment quality have become important policy objectives. At the same time, it is clear that the instruments for economic policy making have changed. While the challenges of the early 1990s could be handled with various direct interventions like credit ceilings and quantitative trade restrictions, indirect instruments for macroeconomic management are gradually becoming more important. For instance, the choice of exchange rate regime is becoming much more important than in the past. This paper summarizes Vietnam¡¯s macroeconomic development, and illustrates some of the alternative approaches to macroeconomic management in an increasingly internationalized and deregulated environment by recounting some experiences from Swedish macroeconomic management during the past three decades.Vietnam; internationalization; macroeconomic management; growth; stability

Asymmetric Shocks and Policy Responses: A comparative analysis of the effects of a monetary union.

This paper analyses how optimal policy responses to productivity shocks change when the government loses the exchange rate as a policy tool after entering a monetary union. It is shown that over the business cycle (generated as cyclical changes in productivity), both deficit and inflation will be more volatile when there is no exchange rate to support the stabilization policies. The reason is that the exchange rate is quite an efficient weapon in addressing the impact on the price level from the different shocks. Losing it therefore makes prices less stable and triggers a more extensive response in the only policy tool left, the deficit. With respect to unemployment, the outcome depends on the source of the asymmetric shock. If the government dislikes fluctuations in the unemployment rate, and supply shocks are mainly domestic in origin, a monetary union is preferable. If supply shocks are instead mainly foreign in origin, unemployment is less volatile under a flexible exchange rate regime.Asymmetric shocks; monetary union; stabilization policy; reaction function.