Abstract for: The Long Runs Effects of Competitive Undervaluation of Dong Currency on the Economic Growth of Vietnam

After joining the World Trade Organization, Vietnam attracts more and more foreign investment. Large increase in foreign capital has been led to an overheating economy. Vietnam has been depreciating its currency over the last several years compared to the dollar, making Vietnam’s exports to the U.S. lower-priced. In short run, it helps Vietnam to increase the exports and boost national income. However, in the long run, it is expected to negatively affect the economic growth. Since imports become expensive because of undervalued currency, Vietnam can not afford to update the technology improvements. With the lack of updating on technology improvements, it is impossible to maintain per capita growth. The impacts on technological growth in Vietnam, measured as Total Factor Productivity, can affect the per capita growth of Vietnam. This paper investigates what long term effects on the economy of Vietnam when the Dong currency is undervalued.