New Zealand Centre for Macroeconomics

Providing a Hub to Advance Research in Macroeconomics

Informing Macroeconomic Policy

New Zealand
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The New Zealand Centre for Macroeconomics

Bringing together researchers to work on policy-oriented projects of international, national and regional macroeconomics. 
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NZCM Working Paper

Vietnam: The Next Asian Tiger?

Tom Barker and Murat Üngör

The rise of emerging market economies has interested economists and political scientists in recent years. In particular, a surge of research on China has provided new theoretical and empirical insight, turning the development experiences of emerging giants into a vibrant area of enquiry. Vietnam’s success and economic development merits a careful systematic look. This paper investigates the convergence experience of Vietnam to date. Following this, a critical approach is adopted to ascertain whether Vietnam can emulate the success of its predecessors, in its journey to becoming an economic powerhouse, not only in Asia, but also on the global stage.

This paper investigate the growth experience of Vietnam, the country that has been getting recent attention as being the next emerging giant. First, we present an aggregate level investigation of Vietnam’s economic growth experience, since the inauguration of reform in 1986 known as Doi Moi. We focus on a top-down approach that performs growth and level accounting exercises. Second, we build a two-sector general equilibrium model, investigating the secular decline in agricultural employment. We conduct a quantitative analysis using a theoretical framework, with an emphasis on the counterfactual outcomes of inheriting Chinese sectoral productivity growth rates, where China is recognised as the paragon emerging economy. The main findings are: (i) Vietnam has grown impressively since 1986, but is still a relatively poor country in absolute terms; (ii) Vietnam must decrease its reliance on factor accumulation as its source of growth and increase its technological capabilities; (iii) economic policies should equally target both agricultural and non-agricultural sectors to increase sectoral productivity growth rates in Vietnam.

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NZCM Working Paper

Trade-Driven Sectoral Upgrading and the Global Imbalances

 Haiping Zhang, the University of Auckland

The recent wave of globalization has two distinct features. First, emerging Asian economies, especially China, have witnessed large current account surplus, while advanced economies, notably the United States, have incurred persistent current account deficits in the past two decades, a phenomenon commonly known as the global imbalances. Second, the declining costs of transportation, communication, and coordination have facilitated the expansion of global production networks and supply-chain trade between advanced and emerging economies.

This paper analyses how trade integration may affect international financial flows in a world with heterogeneous financial development. In the presence of financial frictions and sector-specific minimum investment requirements, the static gains from trade trigger the cross-sector investment reallocation on the extensive margin, which may allow the more financially developed country (North) to sequentially offshore low-return production activities and upgrade to high-return activities. This way, trade-driven sectoral upgrading in North becomes a mechanism through which the rise in North-South supply-chain trade may contribute to the global imbalances in the recent decades.

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