Structural Change, Balance of Payments Constraint, and Economic Growth: Evidence from Vietnam

Abstract

The impact of demand-side factors and rapid structural changes have largely been ignored in explaining the economic growth of Vietnam. This paper employs the multisectoral balance-of-payments constrained economic growth model to capture the influence of structural changes on the exports and economic growth of Vietnam over the period 1997–2016. Based on the estimates for the sectoral income elasticities of demand for exports and imports obtained from autoregressive distributed lag models, this paper argues that it is not relative prices but income that has played a significant role in Vietnam’s economic growth, the income elasticities of demand for exports have grown faster than those of demand for imports, and the weight of exports has significantly moved from primary to high-technology products. JEL Classification: E12, F43, O53