Spill-Over Effect of Fiscal Policy between Vietnam and Its Trading Partners

Abstract

The paper researches about the fiscal policy transmission between Vietnam and its trading partner countries in the period 1995-2016. The paper applies the global vector auto-regression model (GVAR) on the Vietnam's major trading partners such as China, South Korea, Taiwan, Australia, Singapore, the United States, Japan, Thailand, Indonesia, Malaysia, and Philippines to clarify the interdependence between these economics and Vietnam. The research has found that the increase in government spending in the US will reduce household consumption and output in Vietnam. So, it has confirmed the existence of beggar-thy-neighbour effect, when considering the United States and Vietnam. However, there is the impact of increasing the economic benefits in Vietnam, when considering Singapore and Vietnam. It is called prosper-thy-neighbour effect. Other countries have not enough evidences to conclude.