Threshold Effect of State Budget Spending on Economic Growth: the Case of Vietnam

Nguyen Thu Thuy^1, and Ta Van Thang²

¹Fundamental Faculty, Academy of Finance, Hanoi, Vietnam

²Institute of Economics and Finance, Academy of Finance, Hanoi, Vietnam

Cite this paper:
Nguyen Thu Thuy and Ta Van Thang. Threshold Effect of State Budget Spending on Economic Growth: the Case of Vietnam. American Journal of Modeling and Optimization. 2020; 8(1):1-6. doi: 10.12691/ajmo-8-1-1

Abstract

To the best of our knowledge, a very few studies have focused on the threshold effect of budget spending on economic growth in developing and developed countries. The purpose of this paper is to study the threshold effect of budget spending on economic growth in the Vietnam. Using a threshold analysis in the period over 1986-2018. The data were collected from Department of Statistics of Vietnam. Our results demonstrate that the optimal ratio of State budget expenditure to Vietnam's GDP is 24.67%. If this threshold is exceeded, the increase of the percentage ratio of State budget expenditure/GDP will have a negative impact on the speed of GDP growth.

Keywords:
state budget spending economic growth threshold effect

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