Determinants of current account in Vietnam: an intertemporal approach

Abstract

This study attempts to explain theoretically and examine empirically influences of macroeconomics factors on the current account behavior in Vietnam from 2000Q1 to 2010Q2. The study employs the intertemporal approach to build the theory of Vietnam current account behavior’s determinants and applies Autoregressive Distributed Lag method to estimate the model. Theoretically, intertemporal approach was an approach broadly employed to decide determinants of current account recently. It treats current account as an absorber for the economy in facing a shock in income. The study discovers that initial net foreign assets, trade openness, real effective exchange rate and inflation volatility have significant relationships with current account in Vietnam.