The paper discusses how internal and external factors affect economic growth in the economic literature and explores the economic mechanisms through which the macroeconomic variables might impact economic growth directly and indirectly. | 42 | Nguyễn Hoàng Bảo | 42 - 64 Economic Growth Model of Vietnam: Simultaneous Equation System NGUYỄN HOÀNG BẢO University of Economics HCMC - hoangbao@ ARTICLE INFO ABSTRACT Article history: Received: Dec. 12 2013 Received in revised form Jan. 24 2014 Accepted: June 30 2014 The paper discusses how internal and external factors affect economic growth in the economic literature and explores the economic mechanisms through which the macroeconomic variables might impact economic growth directly and indirectly. The simultaneous equation system is employed in order to introduce the key macroeconomic behavior functions using the Vietnamese data for the period 1986 – 2013. The findings are: (1) the major contribution to economic growth is the quantity of investment instead of the quality of investment; (2) the optimal macroeconomic stability has positively affected economic growth; (3) exports have positively impacted on economic growth; (4) the public investment crowds in the private investment generally; and (5) the income, capacity utilization, and the optimal inflation have positively impacted consumption. The paper also shows that the GDP growth rate does not capture well the economic performance of the country because it does not take into account the net factor payment from abroad, natural resource depletion, and the inefficient intra-industry trade. Keywords: Simultaneous equation system, economic growth, intra-industry trade. JED July 2014| 43 1. INTRODUCTION a. Problem Statements: How important are the domestic and foreign resources to economic growth? Do the different types of government policy (fiscal, monetary, trade, and foreign capital control) have different impacts on economic growth? The paper aims to explain the contribution of economic growth and the economic mechanism through which some key macroeconomic variables impact economic growth directly and indirectly using the Vietnamese .
