Employing endogenous growth model, panel data from 62 provinces and cities in 2000-2011 and PMG and Arellano-Bond difference GMM, the research analyzes empirically the relationship between the fiscal policy and economic growth in Vietnam. | JED April 2014| 19 Fiscal Policy in Association with Sustainable Economic Growth in the Period 2011-2020 SỬ ĐÌNH THÀNH University of Economics HCMC - dinhthanh@ BÙI THỊ MAI HOÀI University of Economics HCMC - maihoai@ MAI ĐÌNH LÂM National Academy of Public Administration HCMC - maidinhlam2006@ ARTICLE INFO ABSTRACT Article history: Received: Dec. 12, 2013 Received in revised form Dec. 26, 2013 Accepted: March 31, 2014 Employing endogenous growth model, panel data from 62 provinces and cities in 2000-2011 and PMG and Arellano-Bond difference GMM, the research analyzes empirically the relationship between the fiscal policy and economic growth in Vietnam. Its main findings are: (i) fiscal decentralization and economic growth cointegrate in the long run, but government’s efforts to adjust its fiscal policy during economic shocks that cause disequilibrium or make the economy deviate from its long-term trend produce very low effects; (ii) fiscal income decentralization and fiscal support have positive effects on economic growth while expenditure decentralization does not; (iii) current expenditure and spending on education, scientific research, health care and environmental issues produce positive effects on the economic growth while public investment fails to do so. Keywords: fiscal policy, fiscal decentralization, economic growth. 20 | Sử Đình Thành, Bùi Thị Mai Hoài & Mai Đình Lâm | 19 - 40 1. INTRODUCTION In the economic reform, the fiscal policy has been focused on raising efficient allocation of public resources for sustainable growth. The 1996 National Budget Law amended in 2002 laid a sound foundation for the principles of reforms in fiscal management and decentralization. Decentralization – the transfer of administrative, fiscal and political power to local authorities – has emerged as a major trend in the adoption of development policy in Vietnam. A change in fiscal power and responsibility may increase economic .
