The impact of external debt to economic growth in viet nam: Linear and nonlinear approaches

Abstract

Analyzing the experimental of the impact of external debt on Vietnam’s economic growth using the VECM model from a linear and non-linear perspective in the period from 2000 to 2013. Linear study results showed that external debt has a positive impact on economic growth in the long term. About external debt variable, a 1% increase in external debt would increase GDP by 1.29%. At the same time, the openness of the economy also positively impacts on economic growth at a rate of 1% increase in openness, increasing GDP by 0.5%. The study measured the debt threshold of 21.5% of GDP per quarter in the nonlinear model. Besides that external debt also has positive impact on economic growth in the long term. The results is the basis for giving some policy suggestions to the Government in planning the strategy of using external debt in short and long term for Vietnam in the future.