Growth in International Commodity Prices, the Terms of Trade, and GDP per capita: A Case Study of Vietnam

The Vietnamese economy is characterized by a high degree of international trade
openness and a relatively low GDP share of net-exports. This paper examines the effect
of growth in the terms of trade, and more specifically, in international commodity prices,
on Vietnam's GDP per capita growth. The paper finds that, during 2000-2014, growth in
the terms of trade contributed positively to Vietnam’s GDP per capita growth but the
effect is not large: less than one-tenth of Vietnam’s GDP per capita growth was due to
growth in its terms of trade. The paper argues that the relatively small effect of growth in
the terms of trade on GDP per capita growth is due to a low GDP share of net-exports.
Econometric model estimates show that transitional convergence accounted for about
half of Vietnam's GDP per capita growth during 2000-2014.