This study examines the role of inflation in the public investment–growth relationship in Vietnam using the two-step GMM Arellano-Bond estimators for a balanced panel data of 52 provinces during the period of 2005–2014. | Journal of Asian Business and Economic Studies Volumn 25, Special Issue 01 (2018), 50-67 Journal of Asian Business and Economic Studies Inflation and the public investment: Growth relationship in Vietnam NGUYEN VAN BONa a Unive Sai Gon University ARTICLE INFO ABSTRACT Received 24 May 2017 Public capital spending positively contributes to economic growth and development in many countries worldwide. However, questions concerning the importance of inflation in the public investment– growth relationship are of great interest. This study examines the role of inflation in the public investment–growth relationship in Vietnam using the two-step GMM Arellano-Bond estimators for a balanced panel data of 52 provinces during the period of 2005–2014. More interesting are the empirical findings. First, inflation significantly increases the volume of public capital spending. Second, public investment and inflation enhance economic growth, but their interaction term impedes it. Third, private investment, government recurrent expenditure, and trade openness are the significant determinants of growth. These findings suggest some important policy implications related to public capital spending and inflation in developing countries, specifically the Vietnam government. Revised 19 Oct, 2017 Accepted 1 Jan. 2018 Available online 12 January 2018 JEL classifications: E42; F43; H54 KEYWORDS Public investment Inflation Economic growth GMM Arellano-Bond estimators Provinces in Vietnam a Email: bonvnguyen@ Nguyen Van Bon, JABES Vol. 25(Special 01), Feb. 2018, 50-67 51 1. Introduction Many governments worldwide increasingly invest in infrastructure, education, and health through public investment projects to enhance economic growth, create more employments, and stabilize social security. Thus, public investment crucially contributes to economic activities. However, public capital spending may adversely affect economic development, which .
