The Role of Tariff in Promoting Economic Growth: A Case Study of Vietnam

Nguyen Thanh Giang^1,

¹Department of Public Finance, Academy of Finance, Hanoi, Vietnam

Cite this paper:
Nguyen Thanh Giang. The Role of Tariff in Promoting Economic Growth: A Case Study of Vietnam. Journal of Finance and Economics. 2020; 8(2):86-92. doi: 10.12691/jfe-8-2-6

Abstract

In theory, it was conforming to the accepted standard the open economies grow faster than the closed economies, and respectable economic development level could be achieved. Tariff is one of the key determinant to control the open of the economies. This paper investigates the dynamic impact of tariff on the economic growth in Vietnamese economy between 1999 and 2017 empirically. Secondary data were sourced, from the World Development Indicators, Department of Statistics in Vietnam. The tests of diagnostic conducted are: unit root test, co-integration test, autoregressive distributed lag model (ARDL) and Bound test. The analysis result revealed the tariff and economic growth are co-integrated and have a long-run equilibrium relationship. The tariff was found to have positively impacted on the economic growth in both the short run and long run. Based on study findings, it is recommended that the Vietnamese Government keep and improve the tariff thanks to the positive impact of tariff on economic growth.

Keywords:
tariff economic growth autoregressive distributed lag model

This work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

References:

[1]	Mitra, P., “The Coordinated Reform of Tariffs and Indirect Taxes”, The World Bank Research Observer, 7(2). 195-218. 1992.
[2]	Rajaram, A., “Tariff and Tax Reform: Do World Bank Recommendations Adequately Integrate Revenue and Protection Objeaives?” WPS 1018. World Bank, Washington, D.C. Processed. 1992.
[3]	Pritchett, L. and Sethi, G., “Tariff Rates, Tariff Revenue, and Tariff Reform: Some New Facts”, The World Bank Economic Review, 8(1), 1-16, Jan. 1994.
[4]	Bhagwati, J. and Krueger, A. O., Foreign Trade Regimes and Economic Development, multiple volumes with varying authorship. New York: Columbia University Press. 1973-1976.
[5]	Baldwin, R. E., “The Case Against Infant-Industry Tariff Protection”, Journal of Political Economy, 77, 295-305. May/Jun.1969.
[6]	Lindert, P. H. and Williamson. J. G., “Does Globalization Make the World More Unequal?”, NBER Working Paper 8228, National Bureau of Economic Research, Cambridge, Mass. Apr.2001.
[7]	Anderson, J. E. and Neary, J. P., “Measuring the Restrictiveness of Trade Policy”, World Bank Economic Review 8, 151-169. May.1994.
[8]	Sachs, J. D. and Andrew W., “Economic Reform and the Process of Global Integration”, Brookings Papers on Economic Activity 1, 1-118. 1995.
[9]	Krueger, A. O. “The Effects of Trade Strategies on Growth.” Finance and Development, 20, 6-8. Jun.1983.
[10]	Krueger, A. O., “Trade Policies in Developing Countries.” In Ronald Jones and Peter Kenan (eds.), Handbook of International Economics, volume 1. Amsterdam: North-Holland. 1984.
[11]	Dollar, D. and Kraay, A., 2000. “Trade, Growth, and Poverty.” Manuscript, World Bank, Oct.2000.
[12]	Bloom, D. E. and Williamson, J. G. “Demographic Transitions and Economic Miracles in Emerging Asia”, World Bank Economic Review, 12, 419-55. Sep.1998.
[13]	Dollar, D., “Outward-Oriented Developing Economies Really Do Grow More Rapidly: Evidence from 95 LDCs, 1976-1985”, Economic Development and Cultural Change, 40, 523-544. Apr.1992.
[14]	Edwards, S. 1993. “Openness, Trade Liberalization, and Growth in Developing Countries”, Journal of Economic Literature, 31, 1358-1394. Sep.1993.
[15]	Clemens, M. A. & Williamson, J. G., “Why did the Tariff-Growth Correlation Change after 1950?”, Journal of Economic Growth, 9, 5-46, Mar.2004.
[16]	Jacks, D. S., “New results on the tariff-growth paradox”, European Review of Economic History, 10(2), 205-230, Aug.2006.
[17]	Feenstra, R. C; Mandel, B. R. and Reinsdorf, M. B. and Slaughter, M. J., “Effects of Terms of Trade Gains and Tariff Changes on the Measurement of US Productivity Growth”, American Economic Journal: Economic Policy, 5(1), 59-93. Feb.2013.
[18]	Romano, A. A.; Scandurra, G. and Carfora, A., “Probabilities to adopt feed in tariff conditioned to economic transition: A scenario analysis”, Renewable Energy, 83, 988-997, Nov.2015.
[19]	Wei, W.; Zhao, Y. and Wang, J. and Song, M., “The environmental benefits and economic impacts of Fit-in-Tariff in China”, Renewable Energy, 133, 401-410, Apr.2019.
[20]	Robert, G. and Christoph, M., “Hidden protectionism? Evidence from non-tariff barriers to trade in the United States”, Journal of International Economics, 117, 143-157, Mar.2019.
[21]	Curran, L.; Nadvi, K. and Campling, L., “The influence of tariff regimes on global production networks (GPNs)”, Journal of Economic Geography, 19(4), 873-895, Jul.2019.
[22]	Kinzius, L.; Sandkamp, A. & Yalcin, E., “Trade protection and the role of non-tariff barriers”, Review of World Economics, 155, 603-643, Jan.2019.
[23]	Umer, F., “Impact of Trade Openness on Economic Growth of Pakistan: An ARDL Approach”, Journal of Business & Economic Policy, 1(1), 39-59, Jun.2014.
[24]	Meraj, M., “Impact of globalization and trade openness on economic growth in Bangladesh”, Ritsumeikan Journal of Asia Pacific Studies, 32, 40-50. 2013.
[25]	Hye, Q. M. A. and Siddiqui, M. M., “Export led growth hypothesis: Multivariate rolling window analysis of Pakistan”, African Journal of Business Management, 5(2), 531-536. 2011.
[26]	Pesaran, M. H.; Shin, Y. and Smith, R. J. “Testing for the Existence of a Long-Run Relationship”, DAE Working Papers Amalgamated Series, No. 9622, University of Cambridge. 1996.
[27]	Gujarati, D., Basic Econometrics. 4th Edition, McGraw-Hill Companies, New York. 2004.