Macroeconomic Instability: Causes and Policy Responses

Citation:

Thanh, Nguyen Xuan, Vu Thanh Tu Anh, David Dapice, Jonathan Pincus, and Ben Wilkinson. 2008. “Macroeconomic Instability: Causes and Policy Responses”.

Abstract:

Nguyen Xuan Thanh, Vu Thanh Tu Anh, David Dapice, Jonathan Pincus, and Ben Wilkinson, February 2008

This paper argues that a series of resolute and coordinated policy interventions is needed to restore macroeconomic stability, cushion the impact of the global economic downturn, and keep Vietnam on the path of sustainable growth. Specifically, the Vietnamese government must quell price inflation, reduce fiscal and trade deficits and slow down money and credit growth through a consistent and synchronized set of policy interventions. Gradual deflation of the real estate price bubble is needed in order to avoid a sudden collapse in prices, which would, if it occurred, destabilize the financial sector with potentially serious contagion effects for the real economy. Successful implementation of these policy prescriptions in the near term, and maintaining a stable economic environment over the medium to long term, will require greater policy coordination than the Vietnamese government has demonstrated in recent years.

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