Ngoc Lam

Huy, TL Trang Ngan

Kim

Linh Duong

Keywords: modèle stock-flux cohérent, macroéconomie post-keynésienne, économies émergentes, Viet Nam, changement climatique JEL: E12, E17, E60, Q56, O53 v stock-flow consistent modelling, Post-Keynesian macroeconomics, emerging economies, Viet Nam, climate change JEL: E12, E17, E60, Q56, O53 vi

and suggestions. I also

List of Figures

List of Tables

General introduction Motivation, research objectives and contributions

Globalisation, defined as the integration of an economy into the world through trade and financial flows, offers great opportunities for developing countries to grow faster and reduce poverty [START_REF] Dollar | Trade, Growth, and Poverty[END_REF][START_REF] Prasad | Effects of Financial Globalisation on Developing Countries: Some Empirical Evidence[END_REF]. Developing countries as a whole have increased their share of world trade. It has risen from 36.8% in 2010 to 39.7% in 2013 but has stagnated ever since, increasing only slightly to 40.1% in 2021 (UNCTAD, 2021b).

At the same time, capital flows to developing countries increased significantly during these last years. Foreign direct investment (FDI) has become the most important category. The share of developing countries in global FDI flows remained just above 50%. It contributes to transforming several countries from poor countries to middle-income countries. However, the crises in the emerging markets in the 1990s have made it quite evident that the opportunities of globalisation do not come without risks and issues [START_REF] Imf | World Economic Outlook. Report. International Monetary Fund[END_REF]. It includes the risks of macroeconomic instability and environmental degradation.

Because globalisation and the related global conditions might influence economic outcomes, the current account deficit problem is one of the major macroeconomic problems in developing countries. The current account balance represents the gap between savings and investment.

When a country runs a current account deficit, the saving is less than the investment. It also implies a negative transfer of financial wealth across borders. The current account deficit raises an essential question about its financing. A current account deficit corresponds to foreign capital inflows, increasing a country's vulnerability to heightened risk and uncertainty/financial stability ("sudden stop"). [START_REF] Forbes | Current Account Deficits During Heightened Risk: Menacing or Mitigating? NBER Working Papers 22741[END_REF] highlight two important financial factors: income on international investments and changes in the valuations of those investments. They show how the size of the country's international investment portfolio, its currency denomination, its split between equity and debt, and its return characteristic -affect the dynamics of these financial factors.

On the other side, climate change is one of the global challenges of our time. Developing countries naturally situated in lower latitudes, with higher demographic growth, lower levels of development and resilience, and lower institutional quality, are much more vulnerable to climate change than the developed world. The OECD (2015) reports that Asian countries will be the most affected regions in the world in the next 50 years due to the economic effects of climate change. The IMF (2020) reports that emerging and developing economies suffered almost twice as much average damage relative to the size of their economies during the period 1980-2018. The high level of vulnerability of developing economies will limit the ability to achieve long-term development goals and require adaptation measures. Therefore, building adaptation and resilience to climate risks are central components of any sustainable development strategy. Adapting to a warmer world certainly increases the financing needs of developing countries.

Viet Nam, one of the most open to the world and also among the most vulnerable to the climate change, aptly illustrates this background and offers an appropriate "research laboratory".

The country has achieved remarkable economic development successes since the reform in 1986. Viet Nam witnessed an average of 6-7% annual growth rate and became a lower-middleincome country in 2010. These successes have contributed to the efforts in hunger and poverty reduction throughout the country. Behind this successful story, international trade has been considered one of the key drivers. The average exports and imports in % of GDP over the period 1990-2019 are respectively 61.5% and 66.6% for exports and imports. In 2019 before the COVID-19 pandemic, trade in merchandise reached 210% of GDP. In addition, exports and imports grew at an average rate of respectively 4.3% and 3.4% per year. On the financial side, since its integration in the early 1990s, Viet Nam has become an increasingly attractive destination for FDI. According to the UNCTAD (2021b), Viet Nam was ranked in the top 20 host economies by the amount of FDI inflows. However, participation in globalisation has also increased interdependence among countries, increasing Viet Nam's economic vulnerability in the context of rising trade tensions and volatility and weaker macroeconomic resilience to potential external shocks [START_REF] Mania | Two sides of the same coin? Viet Nam's macro resilience under trade-led growth[END_REF]. In addition, with a lack of sustainable resource management, industrialisation and globalisation have consequently led to severe resource depletion and serious environmental damage. In this context, it is crucial to have a comprehensive macroeconomic analysis and simulation tool for policy-making decisions to contribute to the economic growth strategy and the macroeconomic stability of Viet Nam in a warmer world. Vietnamese government institutions, research institutes and universities are using different types of macroeconomic models for modelling the economy and forecasting as well as policy analysis. It consists of input-output models, regression-based econometric models, time series models and Computable General Equilibrium (CGE) -an accounting-based macroeconomic modelling approach. However, overall, there needs to be more attention paid to the financial sector/system in these modelling frameworks. Nowadays, the behaviour of the real sector of the economy cannot be understood without linking it with the financial sector [START_REF] Nikiforos | Stock-flow-consistent macroeconomic models: a survey[END_REF]. The financial sector plays an increasing role in the economy. It promotes economic growth by mobilising resources for economic activities. To a certain extent, SFC modelling will overcome this missing part of the economy "picture". Besides integrating all sectors, representing the economy as a whole through the principles between stocks and flows, the SFC approach provides a monetary and financial framework. It makes it possible to combine the impact of global warming with the dynamics of capital, private and public debts.

Viet

Hence, the ultimate goal of this thesis is to understand the macroeconomic interactions of different sectors in the Vietnamese economy under globalisation and, thereby, to build an empirical SFC model intended for scenario analysis and policy simulations. To the best of our knowledge, we are the first to develop an empirical SFC model of the Vietnamese economy (SFCVN model, henceforth). It would expand the literature on empirically grounded SFC macro-modelling. The model also serves as a useful tool for policymakers in policy designing by examining the potential effects of public policy.

Thesis outline

To achieve this goal, the thesis comprises six chapters that link to each other (Chart 1).

After this introductory chapter, Chapter 1 describes the main macroeconomic features of the Vietnamese economy, which allow us to better understand observed dynamic behaviours in both the real economy and the financial sectors. We believe it is essential to overview the context within which all studies are carried out later. Then, Chapter 2 is devoted to providing the core literature for the thesis relating to the SFC modelling. These two main pillars enable to build of the SFCVN model. Given that the SFC model is a family of macroeconomic models

Chapter 1 -Macrodynamics of the Vietnamese economy

Globalisation has opened up opportunities for developing countries to engage in global markets, including Viet Nam. Comprehensive macroeconomic analysis, taking into account different components and interactions within the economic system, is crucial for the policy-making decision to contribute to the country's economic growth and macroeconomic stability. Post-Keynesian research has extensively focused on understanding macroeconomic relationships and growth drivers using demand-led macroeconomic regimes. Moreover, understanding macroeconomic policies is also fundamental to know about the dynamics of the economy.

Using the concept of demand and growth regimes and macroeconomic policy regimes with the data from 1996 to 2019, we aim to describe the main features and macroeconomic dynamics of the Vietnamese economy since the crucial reform in 1986. As we can learn for the future from what happened in the past, our analysis is a good starting point for the development and simulation of our SFCVN model.

Chapter 2 -Stock-flow consistent modelling literature

This chapter introduces the SFC modelling methodology and reviews the current literature.

There were already four survey papers on the SFC literature. Here, in this chapter, we aim to update these surveys in the context of the growing number of contributions adopting the SFC approach. On the one hand, it reviews some of the literature on theoretical and empirical SFC models. On the other hand, it allows us to understand how to step-by-step develop an empirical SFC model for a whole country. It consists firstly of working with real data and coping with several issues to construct the model's accounting structure adopting the SNA 2008. Secondly, the structure of the model will be designed with respect to SFC principles. Lastly, the closures of the model and behavioural specifications must comply with the theoretical meaningfulness (economic theory) and take into account the structural characteristics of the Vietnamese economy.

Chapter 3 -Data and accounting structure

The first step of developing an empirical SFC model is constructing the balance sheet and flow matrix. For most countries whose data are available, the balance sheet data are published in the financial accounts of institutional sectors. To the best of our knowledge, there are not yet either institutional sector stock accounts or estimations of national wealth for the Vietnamese economy. Regarding the transaction flows data, a social accounting matrix (SAM) allows to capture of products and monetary (incomes and expenditures) flows of an economy in a year and respect the accounting consistency. However, the details of financial institutions and transactions of agents' assets and liabilities were not developed in these SAMs. Therefore, we decide to rely on the international guidelines of system national accounting (SNA 2008) and collect the data from different sources to build the balance sheet and transaction flow matrix.

We explain how to address the accounting consistency issue that has come up when combining different data sources. Our completed accounting structure sheds light on several dynamics of the Vietnamese economy, which allows us to have a better understanding of the economy.

Chapter 4 -SFCVN -An empirical stock-flow consistent model for Viet Nam

This chapter presents the SFCVN model. The aim of this model is twofold. First, the model provides a theory-consistent representation of the general structure of the country's economy. Second, it offers policy simulation/scenario analysis capabilities to meet the needs of policymakers. It constitutes a means of evaluating the impact/feedback effects of different policies or shocks on the Vietnamese economy. In order to achieve these objectives, the model has to be able to capture the interrelationships between the real and financial sectors of the economy.

The model contains six institutional sectors: firms, central bank, commercial banks, government, households and the rest of the world. Accounting consistencies allow us to see how the sector's decisions in the real economy will affect their assets/liabilities and how the changes in their balance sheet will provide feedbacks on their choices above. Building upon economic theory but also a data-driven approach, the estimations of behavioural equations will be presented in detail. We simulate the model to examine its performance in fitting with the past data. Overall, the model replicates quite well the historical data.

Chapter 5 -Policy responses and model simulation

This chapter is a first attempt to assess the country's ability to conduct macroeconomic policies and to face global external shocks such as the COVID-19 pandemic, given its deep integration into the global economy. To do this, we present some simulation exercises aimed at examining the potential impacts of policy shocks on Vietnamese macroeconomic variables.

It consists of three distinct shocks (fiscal, monetary and foreign shocks). Then, in the second part of this chapter, it develops an application of the model to perform a detailed analysis of the government policy responses to the COVID-19 pandemic, which combines simultaneously monetary and fiscal policies.

Vietnam was deeply affected by the COVID-19 pandemic and faced unprecedented challenges.

To attenuate the negative impact of the COVID-19 pandemic on businesses and households and promote the economic recovery post-COVID-19, the government took several measures.

The targeted discretionary fiscal stimulus supported the healthcare sector and affected workers.

Companies received support from the government through tax breaks, delayed tax payments, and reductions in land lease fees. The State Bank of Vietnam (SBV) took monetary policies to ease liquidity and financing conditions for households, businesses, and commercial banks, which will assume the provided credit to the economy. Given that the COVID-19 stimulus package financing mainly comes from the government's debt in the short term, it raises the crucial question of public debt sustainability. Hence, this chapter aims to analyse the different consequences of this public intervention on both the real and financial sides of the economy using our SFCVN model. The main objective of this chapter is to analyse the main features and macroeconomic dynamics of the Vietnamese economy since the crucial reform in 1986 by using the PKE concept of demand and growth regimes and macroeconomic policy regimes. Given that the Vietnamese economy is the context within which all studies constituting this thesis are carried out, our analysis is a good starting point for developing the SFCVN model. This chapter also contributes to the literature on the macroeconomic analysis of developing countries with a post-Keynesian approach.

Our analysis proceeds as follows. Section 1.2 gives a "snapshot" of the Vietnamese economic performance. Section 1.3 assesses the demand and growth regimes by looking at the growth contributions of the main demand aggregates to GDP growth and sectoral financial balances of the institutional sectors. Section 1.4 examines the macroeconomic policy regimes in the context of important globalisation and financialisation. Finally, Section 1.5 concludes this chapter.

Viet Nam's macroeconomic performance

Macroeconomic indicators can capture the macroeconomic performance of a country. [START_REF] Crockett | Indicators of Policies and Economic Performance. Strengthening the International Monetary System: Exchange Rates, Surveillance and Objective Indicators[END_REF] distinguished three types of economic indicators: i) Indicators of economic performance cover the more fundamental objectives of economic policy: economic growth, employment, the balance of payments and price stability.

ii) Indicators of economic policy (monetary and fiscal) consist of control variables by the government and authorities, such as monetary growth, exchange market intervention, and fiscal deficit.

iii) Indicators of intermediate variables are indirect policy channel transmission (interest rate and exchange rate). They can influence the saving and investment decision of agents.

In addition, according to the New Developmentalism approach (Bresser-Pereira, 2020), which is a theoretical framework for understanding middle-income countries, to understand how the economy grows with price and financial stability, we will also focus on two main macroeconomic accounts (the fiscal and the current accounts) and five macroeconomic prices (the profit rate, the interest rate, the wage rate, the inflation rate and the exchange rate). Especially the exchange rate is a strategic variable in the process of growth. The New Developmentalism demonstrates that the exchange rate in developing countries is volatile and behaves according to an exchange rate cycle: it remains overvalued for several years between financial crises.

rose again and reached another peak in 2011. Indeed, the increase in the global price of several imported food commodities and energy impacts the domestic price level. Moreover, the devaluation of the Viet Nam dong, strong expansion in money supply, and excessive credit growth have contributed to inflation. The government's economic stimulus package in 2009, which led to a strong increase in money supply and significant domestic demand growth, is also considered one of the factors which pushed inflation. Since 2012, inflation has remained at a modest level.

Various empirical studies aimed to explain the determinants of inflation in Viet Nam. They incorporate both cost-push and demand-pull factors, which include money factors, interest rates, exchange rates, international oil prices, and wages. [START_REF] Nguyen | The Impact of Foreign Reserves Accumulation on Inflation in Vietnam: An ARDL Bounds Testing Approach[END_REF] found that the accumulation of foreign exchange reserves will increase inflation because the increase in foreign reserves leads to an increase in the money supply. [START_REF] Le | The Impact of Anchor Exchange Rate Mechanism in USD for Vietnam Macroeconomic Factors[END_REF] showed that the US Dollar (USD)/ Vietnam Dong (VND) exchange rate fluctuation impacts mainly the CPI and the money supply. According to [START_REF] Hoang | The impact of macroeconomic factors on the inflation in Vietnam[END_REF], the most important macroeconomic factors for Viet Nam's inflation are money supply and credit. The increase in money supply will reduce the interest rate and, therefore, devaluate the domestic currency and increase the CPI. [START_REF] Tran | Exchange Rate Policy and Macroeconomic Stability in Vietnam[END_REF] found that the devaluation of Dong implied higher import price, and thus the CPI. The literature provides little evidence on the domestic determinants of inflation but is extremely influenced by foreign factors.

Balance of payments

The balance of payments (BOP) divides transactions into two main accounts: the current

Policy interest rate

The SBV determines three interest rates: base rate, discount rate, and refinancing rate. The base rate is the reference rate for banks' mobilisation and lending activities. The discount rate is the interest rate for the central bank's principal refinancing operation -the short-term acquisition of bonds. The refinancing rate applies for marginal refinancing facilities (short-term mortgage loans, overdraft permission, and overnight loans). The discount rate is referred to as the SBV's floor rate, while the refinancing rate is the ceiling rate. The SBV announces its benchmark interest rates to support economic growth. Credit institutions set lending and deposit rate in VND based on the central bank's interest rate.

Figure 1.35 shows that the deposit rate and lending rate vary with the refinancing rate. In order to reduce or fight the downward direction of inflation, the SBV gradually adjusts interest rates to implement monetary policy.

2011 to now, the data consists of business households and individuals. However, the data covers only the outstanding debt in the banking system. In Viet Nam, people can borrow money from their family, relatives, friends, or informal agents (black credit with high interest rates). The size of black credit was estimated to reach 30% of the total credit of the banking system or about US$50 billion, which is considered extremely high by international standards.

Household debts in Viet Nam rose rapidly from 2000 to 2019 (Figure 1.38). The ratio of household debt to GDP also increased significantly during the same period. The increase in household debt can have a positive impact on economic growth. However, [START_REF] Cecchetti | The Real Effects of Debt[END_REF] found that when household debt to GDP exceeds a threshold value of 85%, it can have a negative effect on macroeconomic indicators such as GDP growth or consumption. [START_REF] Debelle | Household debt and the macroeconomy[END_REF] demonstrated that interest rate, which represents the cost of lending and lending conditions, will impact household debt. The lower (higher) interest rates and favourable (restricted) lending conditions, household debts will increase (decrease).

Over the past few years, the SBV, through commercial banks, has created credits for lowincome groups to purchase houses. It contributes to improving housing conditions as well as socio-economic development.

Exchange rate dynamics

Since the reform in 1986, Viet Nam began the process of global integration and progressively removed trade barriers and capital controls. However, it also increased the high risk of external shocks. Poor macroeconomic policies can cause real exchange rate misalignment and negatively influence economic growth [START_REF] Husain | Exchange rate regime durability and performance in developing versus advanced economies[END_REF][START_REF] Kamin | Output and the real exchange rate in developing countries: an application to Mexico[END_REF]. Therefore, Viet Nam's exchange rate has been one of the most important policies to sustain Vietnamese economic growth.

The exchange rate regime went through several phases (Table 1.1), gradually moving from a strictly pegged exchange rate system to the current stabilised arrangement system (which allows more flexibility but remains a fixed exchange rate system).

The SBV can announce exchange rates and decide on the exchange rate regime and the mechanism of regulating exchange rates. According to the Decision No.2730/QD -NHNN of the SBV in 2015, the SBV will announce the central rate of VND versus USD and the cross rate of VND versus other foreign currencies. This main exchange rate is the basis for credit institutions and commercial banks to determine their buying and selling exchange rates. The

2015-Today Stabilised arrangement

Source: [START_REF] Nguyen | Exchange Rate Policy and the Foreign Exchange Market in Vietnam, 1985-2009[END_REF], [START_REF] Vuong | Essays on Vietnam's Financial Reforms: Foreign Exchange Statistics and Evidence of Long-Run Equilibrium[END_REF] central rate of VND versus USD is calculated based on the inter-bank average VND/USD exchange rate, the exchange rate in the international market of foreign currencies of our main trading partners, countries with a large investment with Viet Nam, the macroeconomic conditions and monetary policy objectives. This mechanism allows the SBV to stabilise the exchange rate of VND and the foreign exchange market, thereby promoting production, trade and investment and stabilising the macro-economy. Moreover, the current exchange rate regime has been described as a managed float. It means that the exchange rate is determined by both market forces and the government's influence. Indeed, the SBV will perform consistent measures and monetary policy tools by selling foreign currencies to stabilise the foreign exchange market and exchange rate within the set band. However, it is evident that economic and financial vulnerabilities increase as the economy opens its borders. They can be considered one indicator of the country's competitiveness. Figure 1.40 shows the evolution of the NEER and REER of Viet Nam from 1995 to 2019. To our knowledge, [START_REF] Kalecki | Selected essays on the dynamics of the capitalist economy[END_REF] argued the relationship between income distribution and aggregate demand.

Post-Keynesian concept of demand and growth regimes

He considered three possible ways to stimulate aggregate demand: (i) deficit spending by the government, (ii) stimulation of private investment through lower interest rates or targeted tax breaks, and (iii) redistribution of income. An increase of the relative wage share in the value-added (redistribution of income toward wages) will contribute to a rise in consumption demand due to the higher marginal propensity to consume out of wages compared with profits. However, wages increase imply higher costs and lower profits for firms. Since profit is a determinant of investment, lower profits lead to lower investment. Higher wages also mean higher costs and lower price competitiveness, reducing net exports. Hence, demand is wage-led when the positive effect of a higher wage share on consumption dominates the potentially negative impact on investment and net exports.

A different view of income distribution emphasised that a redistribution of income toward wages may result in a higher investment via a higher capacity utilisation rate under some implicit assumptions [START_REF] Blecker | International competition, income distribution and economic growth[END_REF]. He also found that a domestically wage-led demand and growth regime may turn profit-led through redistribution effects on net exports. High wages can reduce the country's competitiveness, economic growth, and employment in a relatively open economy. The economy only can enjoy wage-led growth "if workers in all countries in the world increase their money wages and if the international competitive effects roughly cancel out" (Blecker, 1989, p.407). In addition, even with a wage-led regime, it is essential to keep goods and tradable services competitive and reduce imports' income sensitivity. A current account deficit implies that there is dissaving, reducing consumption, output, and employment. [START_REF] Bhaduri | Unemployment and the real wage: the economic basis for contesting political ideologies[END_REF] modified the standard Kaleckian model by treating investment as a function of the profit share and capacity utilisation. In some cases, an increase in the wage share may not only lower investment but also may even lower aggregate demand, so-called profit-led. However, they argued that an exogenous variation of the real wage rate might be feasible in an open economy through an adjustment exchange rate policy. A devaluation of the domestic currency would increase the cost of imported goods, thereby increasing the production cost and domestic price. As a result, it would be upward pressure on export prices and nominal wages. If the country maintains its price competitiveness, devaluation makes domestic good cheaper and possibly improve the trade balance. This effect will depend on the responsiveness of export and import volume to prices, so-called "trade elasticities".

Identifying whether a country is wage-led or profit-led only provides information on the aggregate demand (sum of consumption, investment and net exports) and growth effects of changes in the wage share/the profit share. It still needs to indicate the country's sources and drivers of growth during specific periods. Contributing to this research question, the research on the macroeconomics of financialisation has proposed the notion of macroeconomic regimes in finance-dominated capitalism [START_REF] Hein | The Macroeconomics of Finance-Dominated Capitalism -and its Crisis[END_REF]. Looking at the growth contributions of the main demand components to GDP growth and the financial balances of institutional sectors in the economy allows us to study the sources of GDP growth and how expenditures have been financed. The financial balance is the difference between a sector's income and expenditure.

The financial balances approach directly addresses the question of current account imbalances, an indicator of macroeconomic instability [START_REF] Behringer | Income Distribution and Growth Models: A Sectoral Balances Approach[END_REF]. [START_REF] Baccaro | Rethinking Comparative Political Economy: The Growth Model Perspective[END_REF] developed an analytical approach to comparative political economy that focuses on the relative importance of different components of aggregate demand, which are potential demand drivers of economic growth. They proposed three other alternatives to the traditional Fordist model of wage-led growth: (i) consumption-led growth financed by credit, (ii) investment-led growth and (iii) export-led growth.

Hein (2019) analysed the macroeconomic regimes under the dominance of finance before and after the global financial crisis and distinguished three broad types of regimes: (i) a debt-led private demand boom regime, (ii) an export-led mercantilist regime and (iii) a domestic demand-led regime. The first and third regimes are two opposed regimes: The "debt-led private demand boom" regime has private consumption as the main source of demand and growth, and consumption is financed by debt leading to a rise in private household debt-income ratios. In contrast, the export-led mercantilist regime relies on foreign demand and may lead to rising indebtedness of the foreign sectors. [START_REF] Hein | Demand and growth regimes in finance-dominated capitalism and the role of the macroeconomic policy regime: a post-Keynesian comparative study on France, Germany, Italy and Spain before and after the Great Financial Crisis and the Great Recession[END_REF] examined the growth contributions of main demand aggregates and sectoral financial balances of sectors, which allows an understanding of the demand sources of growth or stagnation, how these sources are financed, and potential financial instabilities and fragilities. They added one intermediate regime to the previous study and defined four demands and growth regimes (Table 1.2).

Three sectoral financial balances approach adopted by Godley and Zezza (1992a) is based on the GDP national accounting identity. According to the GDP accounting by demand approach, aggregate demand comprises household consumption, private investment, public investment, public spending, and net exports. It is assumed that the sum of the private sector (households and business), government sector and the external balance must be zero. The private sector's financial balance exceeds its expenditures over its disposable income. The government deficit is the difference between revenues and expenditures. The external balance represents the country's current account. • a debt-led private demand boom regime: is characterised by deficits of the private domestic sector as a whole, which are, on the one hand, driven by corporate deficits and, on the other hand, by negative or close to zero financial balances of the private household sectors. The latter implies that major parts of the private household sector have negative saving rates out of current income and finance these deficits by increasing their stock of debt or by decreasing their stock of assets. The deficits of the (private) domestic sector are mirrored by positive financial balances of the external sector, i.e. current account deficits. Demand growth is mainly led by private domestic demand, largely financed by credit, while the balance of goods and services negatively contributes to growth.

• an export-led mercantilist regime: shows positive financial balances of the domestic sector as a whole, and by the private household sector in particular, that are matched by negative financial balances of the external sector, indicating current account surpluses.

There are relevant growth contributions of the positive balance of goods and services, thus, rising net exports and current account surpluses, and small or even negative growth contributions of domestic demand.

• a weakly export-led regime: shows either positive financial balances of the domestic

Macroeconomic policy

Understanding macroeconomic policies is fundamental to understanding the dynamics of the economy. Macroeconomic policies have both short-run and long-run effects on macroeconomic performance and the macroeconomic regime.

Post-Keynesian macroeconomic policy regime approach

Policymakers should use several instruments to achieve their various objectives [START_REF] Tinbergen | Economic Policy: Principles and Design[END_REF]. Some post-Keynesians have used the concept of a 'macroeconomic policy regime' to assess intertemporal comparative differences in the macroeconomic performances of the country. It describes the set of monetary, fiscal and wage or income policies and their coordination and interaction against the context of the economy, including the degree of openness or the exchange rate regime. The macroeconomic policy regime is linked to the changes in demand and growth regimes [START_REF] Hein | Demand and growth regimes in finance-dominated capitalism and the role of the macroeconomic policy regime: a post-Keynesian comparative study on France, Germany, Italy and Spain before and after the Great Financial Crisis and the Great Recession[END_REF]. In order to have a stable domestic demand-led regime, the macroeconomic policy regime should have the following:

• Monetary policy: a nominal long-term interest rate should be slightly above the inflation rate but below nominal GDP growth or a slightly positive real interest rate below real GDP growth.

• Wage policy: nominal wages should rise according to the sum of the long-run average growth of labour productivity and the target inflation rate to keep mark-up pricing constant and stabilise income distribution.

• Fiscal policy should contribute to stabilising demand and improving productivity growth and, thus, potential growth in the long run, particularly through public investment.

Macroeconomic regimes in Viet Nam

Based on the indicators of macroeconomic policies mentioned above, we try to analyse the macroeconomic policy regime for Viet Nam during the period 1997-2019 (Table 1.4). For monetary policy, we use the interest rates of the SBV. For wage policy, we build indicators related to labour cost and income from the available data of GSO. For fiscal policy, we use only the indicator associated with public investment. The analysis of these indicators allows linking with the macroeconomic demand and growth regime.

Between 2001 and 2009, the macroeconomic policy regime could contribute to the shift from the weakly export-led regime to the debt-led private demand boom regime. The expansionary monetary policy stance represented by the low real interest rate and the development of the credit system promoted credit access for business investment and household consumption or investment. However, this period experienced high inflation and high unit labour cost growth. Thus, the labour income share slightly increased relative to the previous period. The expansionary fiscal policy (high public investment to GDP ratio) contributed to the aggregate demand and economic growth. However, the high inflation and unit labour cost led to a slight, real appreciation and a small loss of price competitiveness. Vietnamese economy still held low non-price competitiveness in this period.

Conclusion

Viet Nam, one of the emerging markets, has experienced remarkable economic growth, with an average 6-7% annual growth rate since the reform in 1986. Economic growth has markedly lifted the living standards of the Vietnamese people. The country became a lower middleincome country in 2010. The integration into the international economy has been one of the major determinants of the country's economic development over the last two decades. The degree of openness has continued to increase since the trade liberalisation. The country has become an attractive destination for FDI. The privatisation process in Viet Nam contributed to strengthening the private sector. The government made many efforts to promote political, financial and macroeconomic stability and a favourable environment for investment.

Moreover, the rapid development of the financial sector has contributed to productive sector growth. The Vietnamese central bank promotes price stability, financial system stability and development through the promotion of financial inclusion, oversight of the payments system and regulation of the banking system. However, the economy still relies on the external sector. Indeed, the export-led growth model must focus on developing the national/domestic productive capacity. The trade depends mainly on foreign multinational corporations, FDI firms and joint venture companies.

In this chapter, the Post-Keynesian approach allows us to understand the main features, dynamics and interaction between domestic features of the Vietnamese economy and its external features. Post-Keynesian theory starts with an understanding of the nature of the subject matter and applies mathematical methods to suit [START_REF] Dow | Chapter 1: Opportunities and challenges for post-Keynesian economics?[END_REF]. The SFC modelling approach, usually considered part of PKE, provides a general framework for representing the whole economic system. In addition, according to [START_REF] Bezemer | Understanding financial crisis through accounting models[END_REF] [START_REF] Abbott | A Critical Review of Studies on the Social and Economic Impacts of Vietnam's International Economic Integration[END_REF]. Time series models such as VAR, ARIMA, and structural macro-econometric models are also used at NCIF to produce forecasts for macroeconomic indicators. The MOF has based on CGE models, ARIMA/VAR or simple regression models to evaluate the impacts of different scenarios of tariffs. Regarding financial modelling, the SBV has developed models related to leading indicators such as inflation [START_REF] Tran | Forecasting Inflation in Vietnam with Univariate and Vector Autoregressive Models[END_REF] and exchange rate [START_REF] Nguyen | Sources of exchange rate fluctuation in Vietnam: an application of the SVAR model[END_REF] or assessing the effects of various monetary policies [START_REF] Bui | The Transmission Mechanism of Monetary Policy in Vietnam: A VAR Approach[END_REF].

Regarding international organisations, the IMF has described the Vietnamese economy using its Forecasting and Policy Analysis System (FPAS) model [START_REF] Dizioli | A Macro-Model Approach to Monetary Policy Analysis and Forecasting for Vietnam[END_REF].

It includes four main equations related to the aggregate demand curve, the price dynamic, the uncovered interest rate, and the monetary policy rule. The World Bank has developed a macroeconomic and fiscal model (MFMod) [START_REF] Andrew | The World Bank Macro-Fiscal Model Technical Description[END_REF]. The model is used to generate country forecasts and simulate various policies. Each model has a similar structure and functional form, but the parameters are specific for each country due to the data availability and economic specialisation. The model has different blocks, including the supply side, GDP demand side, price determination, labour market, fiscal accounts, the balance of payments and monetary policy.

Overall, there needs to be more attention paid to the financial sector/system in these general equilibrium models. Indeed, the global financial crisis in 2008 has revealed the critical need to pay more attention to the inefficient market hypothesis so that the integration of the financial sector (i.e. money, debt and assets) allows a proper understanding of observed dynamic behaviours in the real economy sector. The inefficient market hypothesis should indeed be understood as a radical uncertainty (and non-probabilistic) about the future. While giving a specific role to the financial sector, such uncertainty does not allow any reference to a unique optimal equilibrium. Taking into account some assumptions about the future, the radical uncertainty hypothesis directly impacts firms' and households' investments and, thus, the overall production. While they were marginalised during the golden age of the Great Moderation and Monetarism, SFC models assume that financial and real variables should be put together and analysed as a whole in the same model. They are, therefore, best suited to address the challenges posed by the recent crisis. This approach is used in the following chapters (Chapter 3 and 4) to build an empirical SFC model for the Vietnamese economy.

This chapter introduces the SFC methodology of macroeconomic modelling and the current SFC literature. There were four survey papers on the SFC literature. Dos [START_REF] Santos | Keynesian theorising during hard times: stock-flow consistent models as an unexplored 'frontier' of Keynesian macroeconomics[END_REF] focused on macroeconomic closures of the same accounting framework with different strands of Keynesian "schools of thought". [START_REF] Caverzasi | Post-Keynesian stock-flow-consistent modelling: a survey[END_REF] divided the SFC literature according to its subject and methodology. [START_REF] Nikiforos | Stock-flow-consistent macroeconomic models: a survey[END_REF] provided a pedagogical, rigorous survey and was accessible to the non-specialist reader. They tried to make clear the links between the theoretical elements of the SFC methodology and macroeconomic debates.

Zezza (2019) overviewed a number of contributions to macroeconomics which adopt the SFC approach to data for a particular country. Here, in this chapter, we aim to update these surveys in the context of the growing number of contributions adopting the SFC approach.

The rest of this chapter is organised as follows. Section 2.2 and 2.3 outline the origin and the main principles of the SFC approach. Section 2.4 introduces the theoretical SFC literature. Section 2.5 discusses the empirical SFC literature and the procedure for developing an empirical SFC model. Section 2.6 concludes.

Stock-Flow Consistent modelling

Origin of stock-flow consistent models

SFC models are a type of macroeconomic model of PKE. The methodological root of the SFC approach can be traced back to the work of [START_REF] Copeland | Social Accounting for Moneyflows[END_REF]. It emphasised the important role of moneyflows in the organisation of economic activities and full employment. Measures of moneyflows will help us to answer the questions related to where the money comes from to finance total purchases in the economy, what becomes the money that is not spent, the role of cash balances, other liquid asset holdings and debts play in the cyclical expansion and contraction of moneyflows. He established a theoretical framework to link economic and financial flows with stocks by integrating the standard national income accounting identity with the flow of funds. This study assumed that the social accounting approach to the subject of money, credit and moneyflows rests on a quadruple-entry basis. Thus, four fundamental propositions in this work are also the main principles of the current SFC approach: "(1) For any transactor for any period, total sources equal total dispositions of money. (2) A source of money for one transactor means a disposition of money by someone else and vice versa.

(3) A loan fund receivable for one transactor means a loan fund payable by someone else and vice versa. (4) An increase in a loan fund balance receivable is a disposition of money by the holder; for someone else, it means a decrease in a loan fund balance receivable or an increase in payables and a source of money. The converse holds for this proposition too" (Copeland, 1949, p.257).

After [START_REF] Copeland | Social Accounting for Moneyflows[END_REF], Tobin and his research group [START_REF] Backus | A Model of U.S. Financial and Nonfinancial Economic Behavior[END_REF], based at Yale University in the New Haven, have influenced today's SFC approach. They aimed at modelling the process of asset accumulation and economic activity and estimating a model for the US economy. The model emphasises that financial markets and institutions can be used to address the financial consequences of public policies. Other major contributions of Tobin are in his Nobel Memorial Lecture [START_REF] Tobin | Money and Finance in the Macroeconomic Process[END_REF]. One of the key features of SFC models is the definition of portfolio equations. It means to link households' wealth-allocation decisions across different financial assets to their relative return rates, market price expectations and agents' liquidity preference. The flow of funds will allow matching the demand for financial assets with their supply to ensure the equality between financial assets and liabilities in the system. Other main features pointed out by Tobin influencing the macroeconomic models are as follows:

(i) Precision regarding time: Models must be dynamic. The economy's state at a certain time depends on the previous periods' states.

(ii) Tracking of stocks: Stocks change over time by accumulating flows. The whole system is affected by their feedback on transactions-flows (e.g. consumption, investment and production decisions).

(iii) Plurality of assets (liabilities) and return rates. There are many different financial assets (liabilities) in the system, each of which is possibly characterised by a different interest rate.

(iv) Integration of real and financial sides. Not only is the financial sector made up of a plurality of financial assets in addition to cash money, but there is no long-run neutrality of money.

(v) Walras' law and adding-up constraints: Portfolio equations must be subject to algebraic constraints to meet the stock-flow consistency criteria. In addition, for the Walrasian principle, one equation of the model is logically implied by all the others and must be dropped to avoid over-determination.

The Cambridge Economic Policy Group (CEPG), led by Wynne Godley, pursued this Tobin's approach. Wynne Godley worked for the Treasury for several years, then joined the University of Cambridge and created the CEPG. His work with Francis Cripps represented the most basic principles of SFC modelling [START_REF] Godley | Demand, inflation and economic policy[END_REF][START_REF] Cripps | Control of imports as a means to full employment and the expansion of world trade: The UK's case[END_REF][START_REF] Godley | Demand, inflation and economic policy[END_REF]. These works tried to combine the real and financial sides of the economy and combine economic theory and policy.

After joining the Levy Economics Institute of Bard College, Godley applied the same approach to the US economy called " the Levy Macroeconomic Model", which contributed to successfully predicting the recession in 2001 and 2008 (Godley and Zezza, 1992b;[START_REF] Godley | Seven unsustainable processes: Medium-term prospects and policies for the United States and the world[END_REF]. Moreover, the integration of the financial and the real side of the economy allows for testing the Minsky's hypothesis related to financial fragility and its links to the real variables [START_REF] Minsky | The Financial-Instability Hypothesis: Capitalist Processes and the Behavior of the Economy[END_REF]. Many of Godley's models and analyses formalise Minskyan ideas. Since the publication of Monetary Economics in 2006 (Godley and Lavoie, 2007b), resulting from a long research project by Wynne Godley and Marc Lavoie, there has had a growing number of works adopting the SFC approach for examining a variety of economic questions such related to financialisation, income distribution and contributing to policy debates related to austerity policies, the balance of payment imbalances.

In the following parts, we overview the basic principles of SFC modelling. SFC models rely on two basic principles: accounting consistencies and closure/behavioural specifications [START_REF] Nikiforos | Stock-flow-consistent macroeconomic models: a survey[END_REF].

Main principles of SFC modelling

Based on national accounts, SFC macroeconomic models will be developed in order to respect four main accounting principles. These accounting consistencies allow us to see how agents' decisions in the real economy will affect their assets/liabilities and how these changes in the balance sheet will provide feedback on their decisions above. However, it will impose several constraints and reduce the degree of freedom of the SFC models.

• The flow consistency means that there are no "black holes" in the economic system.

Every monetary flow comes from somewhere and goes somewhere. Each payment/receipt of a sector implies a change in the assets/liabilities of that sector. In other words, we distinguish the horizontal consistency between institutional sectors (wages paid by firms and received by households ) and the vertical consistency within each sector (households received incomes and then increased their deposits).

• The stock consistency implies that the financial liabilities of a sector are the financial assets of one or other sectors.

• The stock-flow consistency ensures that every flow implies a change in one or more stocks. The stock of financial liabilities indicates future interest payments or dividends to the corresponding sectors and will impact flow decisions such as consumption and investment.

• Every transaction involves a quadruple entry in accounting (inflow, outflow, changes in assets, changes in liabilities).

These principles will be represented in two matrices: the balance sheet -stock matrix and the transactions-flow matrix. The balance sheet represents the financial structure of the economy by displaying the tangible stocks, financial stocks and financial liabilities of each institutional sector at the end of each period. The transactions-flow matrix demonstrates the real transactions and financial flows implied from stocks of financial assets and sectoral budget constraints. In order to distinguish between non-financial and financial transactions, we consider the transactions-flow matrix for non-financial transactions and the flow of funds for financial transactions [START_REF] Cohen | Money and Finance: A Flow-of-funds Approach[END_REF]. It combines the national income equations with the sectoral flow of funds accounting. It means that each sector's net lending/borrowing position must correspond to the flows of investment and, hence, the stock (holdings) of net financial assets/liabilities.

We present here examples of balance sheet (Table 2.3), transactions-flow matrix (Table 2.1) and flow of funds (Table 2.2) to illustrate these accounting principles described above.

These detailed matrices for the Vietnamese economy will be explained in Chapter 3. We consider a simple framework including four institutional sectors: firms, banks, government and households. A column in the accounting matrices will represent it. It incorporates real assets (tangible capital) and four financial assets (deposit, loan, bond and equity) with different rates of return. A row represents them on the BS. In the transactions-flow matrix (Table 2.1), the positive sign represents an inflow for the sector, while the negative sign represents an outflow of the sector. Each row represents a transaction between sectors. For example, wages (WB) are paid by firms and received by the household sector. Firms pay taxes (T) to the government. The sum of each row will be equal to 0 to assume the horizontal flow consistency.

The stock-flow consistency will be represented via the rows of interest payments. The stock of financial liabilities implies interest payments or dividends to the corresponding sectors. For example, firms borrow from banks and pay interest on loans to banks.

If the transactions-flow matrix records the income and expenditure flow of sectors, the flow of funds (Table 2.2) deals with financial flows (i.e. changes in financial assets) between sectors in the economy. These two flow matrices are linked via each sector's net financing capacity. It means that each sector with a financing capacity will allocate it among different financial assets. The sector with a financing need will have to borrow from other sectors to finance its financing need. For example, firms can finance by borrowing from banks or issuing equity held by households. The government can finance the public deficit by issuing bonds.

Households will increase their deposits in banks with the money which has not been spent.

Each payment/receipt of a sector implies a change in the assets/liabilities of that sector. It also represents the vertical consistency within each sector. For example, households received wages and then increased their deposits. In the balance sheet (Table 2.3), the positive sign represents an asset for the sector, while the negative sign represents a liability of the sector. For example, bank deposits are an asset of the household sector and a liability of the banks. Following the stock consistency, each row must sum to zero (except for the tangible capital). As a real asset does not imply the creation of liability, the row of tangible capital will not sum to zero.

The balance sheet matrix illustrates the accumulation of assets and liabilities of each sector in the economy. The stock of assets/liabilities corresponds to the stock of the preceding period plus the transactions of the current period and the revaluation effects due to changes in asset prices. These capital gains/losses can be recorded in a separate matrix (Table 2.4).

Given that each financial asset has its financial liability, the changes in the value of financial instruments must sum to zero. Firms Banks Government Households Total

Tangible capital p K k f p K k g p K k Deposits -DM DM 0 Loans -L L 0 Bonds -B B 0 Equity -p E E p E E 0 Net Wealth NW f NW b NW g NW h NW
For example, at the end of the period, the value of the stock of equities is given by:

p E E = p E E -1 + p E ∆E + ∆p E E -1

Firms

Banks Government Households Total

Tangible capital ∆p K k f -1 ∆p K k g -1 ∆p K k -1 Equity -∆p E E -1 ∆p E E -1 0
To sum up, by combining these stock and flow matrices, we derive all the accounting identities of the SFC model.

Closure and behavioural specifications

The closure or behavioural specifications are crucial in SFC models. It defines the direction of causality among the macroeconomic variables in the system. The SFC literature has developed mostly inside the Keynesian school [START_REF] Nikiforos | Stock-flow-consistent macroeconomic models: a survey[END_REF]. Presuppositions of most SFC models are also that of post-Keynesian economics (Lavoie, 2014;[START_REF] Carnevali | Stock-Flow Consistent Dynamic Models: Features, Limitations and Developments[END_REF]Passarella, 2022) as follows:

• Realism: the model will try to reflect the true structures and explain the causal mechanisms of the phenomena [START_REF] Fullbrook | Pluralist Economics[END_REF]. [START_REF] Caldwell | Post-Keynesian methodology: an assessment[END_REF] argues that the post-Keynesians value explanation rather than prediction. In addition, "a theory cannot be correct unless it starts from realist or realistic hypotheses, although it is recognised that assumptions are always abstractions or simplifications...".

• Organicism: the economic system is complex with the interactions between different agents in the economy.

• Reproduction conditions: in post-Keynesian models, resources are not scarce. The problem is related to something other than the optimal allocation of resources/production factors. Still, the question is how to increase production, growth rate, and capacity utilisation rate.

• Principle of effective demand: the economy is demand-driven in both the short and long run. Aggregate demand drives output and employment.

• Quantity adjustment: supplies adjust to demand quantities, not price adjustment.

• Reasonable rationality and fundamental uncertainty: agents rely on some rules or conventions because of uncertainty. There is no maximisation and no (hyper) rational expectations.

• Multiple equilibria and path-dependency: there is no natural level of output or employment. The long-run is just a sum of short runs. Today's position depends on past positions.

• Investment causes saving: investment generates saving, not vice versa

• Money endogeneity: money does not fall from the sky. Firms demand loans to finance production and fund investment plans. Loans generate deposits, not vice versa.

• Financial assets are not perfect substitutes: capital mobility is usually assumed, but there is no tendency for the rates of return to level out.

• No or limited substitutability of inputs: dedicate equipment, and we cannot replace nature with «capital».

• Power relations and income distribution: income distribution is not defined by marginal productivities. It depends on social, institutional and political factors

• Open system and pluralism: Decision-making in the economy requires multiple strands of argument. "Argument therefore requires reason (which may be expressed mathematically)

and evidence, but also conventional judgement, expert judgement, and intuition or animal spirits" (Dow, 2019, p.9) Nikiforos and Zezza (2017) classified five broad categories of behavioural assumptions in SFC models.

• Specify how the agents determine their expenditure: consumption function, investment function, and government expenditure function.

• Specify how the agents finance their expenditure and possible net borrowing positions: public debt, firm's debt structure or household's debt.

• Specify how sectors allocate their financing capacity/wealth among different financial assets.

• Specify the productivity growth, wages, inflation

• Specify the behaviour of the financial system, including the banking sector, central bank and monetary policy. These behaviours will impact the real economy.

Behavioural assumptions are crucial in determining a "steady state" (i.e. a long-run equilibrium of the economy. As mentioned above, the long-run in SFC models depends on the short-run.

The model dynamic will be represented via the feedback of the stock of assets and liabilities of the previous period into the flows of the next period, which in turn define the stocks at the end of the period (path-dependence). Indeed, transactions between sectors will affect the redistribution of stocks held by each sector. Then, stocks in the current period will generate the flows in the next period. Godley and Lavoie (2007b) define "a steady-state" as a state

where the ratios of variables (both flows and stocks) remain in a constant relationship to each other. When the levels of the variables are constant, the steady-state is a stationary state.

Methodological issues of stock-flow consistent modelling

Caverzasi and Godin (2015) introduced three debates on methodological and theoretical issues regarding SFC modelling, which are also the problem we have to deal with later.

a) Solving the model

There are three possible ways to solve the model: simulated, analytical and discursive solution.

The simulated solution requires some fundamental questions related to the values of parameters (estimated vs calibrated) and initial endogenous variables; and how to use the results of the simulations. The econometrically estimated parameters will raise concerns about the implicit assumption of their constant value during the simulation period. "However, the further from last observed values, the less statistically significant are those predictions". This issue is called the "Lucas critique". In some cases, the modeller can assume some changes in parameters with justifications for the choices and the right balance between model complexity and realistic behaviours. Another option is to calibrate the values for the parameters and initial values of endogenous variables using stylised facts or rules of thumb. Two approaches can obtain the results of the simulation: "(i) the model starts from a stationary/steady-state situation and is then shocked; or (ii) the model is run for a baseline scenario, without being constrained to a stationary/steady-state, and various scenarios are then run, changing certain parameters".

Calibration allows to include of any specification to develop more realistic models but presents some drawbacks. [START_REF] Lavoie | Kaleckian Models of Growth in a Coherent Stock-Flow Monetary Framework: A Kaldorian View[END_REF] emphasised that "the disadvantage is that we can only analyse local stability: we do not know if there are other equilibria, or if these other equilibria are stable". Due to the large model leading to their mathematical complexity and the dependence on the value of parameters, the results of the simulation will certainly be sensitive to the value of parameters (Dos [START_REF] Dos Santos | Revisiting (and Connecting) Marglin-Bhaduri and Minsky: An SFC Look at Financialization and Profit-Led Growth[END_REF][START_REF] Lavoie | Kaleckian Models of Growth in a Coherent Stock-Flow Monetary Framework: A Kaldorian View[END_REF]).

An analytical solution is for a much simpler model. Although it will be difficult to represent complex theories, it can still provide interesting economic insights and represent theoretical and didactical tools. A third possibility to solve SFC models is to use the accounting part of SFC models, and eventually the behavioural hypothesis, as a reference for a theoretical discursive paper. It allows us to understand how the economy behaves if it tends towards equilibrium or presents an explosive behaviour.

b) Time-related characteristics

As mentioned above, the long-run dynamics of SFC models consist of a path of short-run periods interconnected with each other via the stocks [START_REF] Keynes | The General Theory of Employment, Interest and Money[END_REF][START_REF] Robinson | The Accumulation of Capital[END_REF][START_REF] Kalecki | Selected essays on the dynamics of the capitalist economy[END_REF][START_REF] Zezza | A Simplified, Benchmark, Stock-Flow Consistent Post-Keynesian Growth Model[END_REF]. In other words, SFC models should exhibit path dependency, and the rationality of the stationary and steady-state to be questioned. While the stationary state is where all stocks and flows do not change over time, the steady-state is where all stocks and flows grow at the same rate. [START_REF] Zezza | A Simplified, Benchmark, Stock-Flow Consistent Post-Keynesian Growth Model[END_REF] and Dos [START_REF] Dos Santos | Revisiting (and Connecting) Marglin-Bhaduri and Minsky: An SFC Look at Financialization and Profit-Led Growth[END_REF] show that it is doubtful that an economy reaches a steady-state. Still, the stationary state affects the dynamics of short-run realisations and allows for comparing the effects of different policies.

Furthermore, we believe that, in reality, behaviours are constantly changing, preventing the economy from ever reaching any steady-state or stationary state. Our simulation exercise also will show that the values of stocks or flows might not make any economic sense in some cases.

Even the simulation is stopped due the mathematical issues. This characteristic related to path dependency is essential for SFC models. It will help to explain why the same set of values of the parameters in the behavioural equations but different applied shocks can lead to different steady states.

c) Combination of SFC modelling and Agent-based modelling Since the economy is a complex system with interactions between economic agents, agent-based modelling (ABM) is a methodological approach that specifies individual agents' behaviour.

Even if it emerges from the agents' microeconomic behaviour, ABM can show how the macroeconomic variables are determined through the interaction of multiple heterogeneous agents with various distributions and networks within the economy. The combination of SFC modelling and ABM offers a better microfoundation for macroeconomic models. However, the complexity of interaction between agents causes difficulties in the model's tractability and explanation of the results or dynamics.

The literature categorised SFC models into three groups based on the extent of fitting the features of a real economy: theoretical, empirical and fully empirical. In the following sections, we will present two main categories: theoretical and fully empirical, also called empirical SFC models for whole countries [START_REF] Zezza | On the design of empirical stock-flow consistent models[END_REF].

Theoretical stock-flow consistent modelling

Theoretical SFC models are used to illustrate economic theories and not for projections; no attempt at fitting model variables to actual data, and parameter values are not obtained by either econometric estimates [START_REF] Zezza | On the design of empirical stock-flow consistent models[END_REF]. The level of complexity of the model (number of institutional sectors and assets, closures and behavioural specifications) depends on the research question. Several papers tried to include several financial aspects in the model and financial assets in the balance sheet to analyse the effects of financialisation. [START_REF] Lavoie | Financialisation Issues in a Post-Keynesian Stock-flow Consistent Model[END_REF] simulated the changes in the financial behaviour of firms and households (i.e.

firms' equity issued and retained profits and households' desire to hold equities and demand for loans), and two simulations representing the current financial crisis (i.e. lower loans and profit margins of banks). [START_REF] Zezza | A Simplified, Benchmark, Stock-Flow Consistent Post-Keynesian Growth Model[END_REF] also expands a previous paper (Dos [START_REF] Dos Santos | A Post-Keynesian Stock-Flow Consistent Macroeconomic Growth[END_REF] to include the new evidence emerging from the 2007 subprime mortgage crisis.

An early SFC treatment of financialisation is [START_REF] Skott | Macroeconomic implications of financialisation[END_REF], which demonstrates that the effects of financialisation critically depend on a labour-constrained "mature" economy or a "dual" economy.

The subject of financialisation and income distribution was addressed by [START_REF] Van Treeck | Macroeconomic determinants of worker's remittances: Host versus home country's economic conditions[END_REF].

The model supposed that the determinants of investment decisions are Tobin's q, the retention rate and the leverage. Households become indebted to consume. To analyse the role of shareholder value orientation, the author considered two simulations: a change in the proportion of equity issued and an increase in the dividends payout rate. The results show a negative correlation between investment and shareholder orientation. However, the changes in parameters depend on the relative strength of the wealth and debt effects. In another work focusing on income inequality, [START_REF] Dallery | Conflicting Claims and Equilibrium Adjustment Processes in a Stock-flow Consistent Macroeconomic Model[END_REF] developed a model to study the conflicting claims among workers, shareholders, and managers. While capital accumulation is the primary objective of managers (a "Fordist regime"), the maximisation of shareholder value is the primary goal in a "financialisation regime".

Several SFC contributions formalise Minskyan concepts -"financial instability hypothesis".

Dos [START_REF] Santos | A Stock-Flow Consistent General Framework for Formal Minskyan Analyses of Closed Economies[END_REF] and Dos [START_REF] Dos Santos | Revisiting (and Connecting) Marglin-Bhaduri and Minsky: An SFC Look at Financialization and Profit-Led Growth[END_REF] argue that the "formal Minskyan" literature can be better appreciated in a SFC accounting framework. Such a rigorous and flexible model will allow the analysis of fiscal and monetary policies. [START_REF] Tymoigne | The Minskyan System, Part III: System Dynamics Modeling of a Stock Flow-Consistent Minskyan Model[END_REF] One of the crucial questions in an open-economy framework is the determination of the exchange rate. The performance of the economy, the agents' portfolio choice, and the policymakers' decisions are the main determinants of the exchange rate. In turn, the exchange rate will affect the performance of exports and imports, but also the portfolio choice of the agents (since it will affect the price of foreign assets in domestic currencies). This is yet another channel where the real and financial sides of the economy are integrated within the SFC framework. For example, a change in the portfolio preferences of the agents will tend to change the exchange rate, which will feed back into the real economy. Godley and Lavoie (2007b) represented by an increase in public expenditures or an increase in the interest rate. A fiscal policy needs to incorporate some important elements such as public deficit and government debt rule in order to avoid instabilities and the role of tax rebates on income distribution [START_REF] Pucci | Réductions d'impôts et dette publique: un lien à ne pas occulter[END_REF]. Godley and Lavoie (2007a) deploy a simple SFC model in order to examine various contentions regarding fiscal and monetary policy. They show that "if the fiscal stance is not set in the appropriate fashion, that is, at a well-defined level and growth rate-then full employment and low inflation will not be achieved in a sustainable way". They also point out two unconventional conclusions: "first, that an economy (described within an SFC framework) with a real rate of interest net of taxes that exceeds the real growth rate will not generate explosive interest flows, even when the government is not targeting primary surpluses; and, second, that it cannot be assumed that a debtor country requires a trade surplus if interest payments on debt are not to explode". [START_REF] Zezza | Editorial to the special issue on empirical stock-flow consistent models[END_REF], presenting the main features of the "Levy macroeconomic model", show the effects of fiscal policy and its implications for the proposed fiscal stimulus on the U.S. economy.

He also demonstrated that the New Cambridge hypothesis, which claimed that the private sector financial balance would be stable relative to income in the short run, does not hold for the short term in our model. Still, it does hold for the medium/long term. This implies that the major impact of the fiscal stimulus, in the long run, will be on the external imbalance unless other measures are taken.

Le Héron (2012) studied the relation between fiscal and monetary policies by analysing the effects of the monetary policy, netting out the impact of the fiscal one. He concluded that the latter could never be neutral due to the high amount of transmission channels. [START_REF] Arestis | The 'new economics' and policies for financial stability[END_REF] enter this debate using the same methodology based on shocking the system to investigate how the modelled economy reacts to a fiscal, monetary or mixed policy. The results show the importance of fiscal policy, which they suggest should take a leading role in driving aggregate demand.

Empirical stock-flow consistent modelling

Empirical SFC models for whole countries

There is a growing interest in confronting the SFC approach with real empirical cases. Fully empirical SFC models (empirical SFC models for whole countries) replicate the main features of a particular economy. It begins with Godley's works in the 1970s which tried to model the link between the sectoral balance sheets and the GDP components. The so-called "New

Cambridge" approach is considered an important contribution to macroeconomic modelling and heterodox applied macroeconomists. Godley adopted the GDP national accounting identity in terms of three sectoral balances (private, public and external). It is assumed that the private sector includes households and firms [START_REF] Lavoie | The Stock-Flow Consistent Approach: Selected Writings of Wynne Godley[END_REF]. This relation allows us to understand the imports. The aggregate demand is the sum of consumption (C), investment (I), government expenditures (G) and exports (X). The supply is the sum of domestic production (Y) and imports (M). Assuming that the private sector pays taxes (T)

to the government, the private balance will be given by:

P B = (C + I) -(Y -T )
where C + I is the expenditures of the private sector, Y -T is their disposable income.

The public deficit is defined by:

GB = G -T
The external balance is calculated as follows:

XB = X -M
According to the national accounting identity, the three balances sum to zero.

P B + GB + XB = 0
Table 2.5 summarises the countries that SFC models have been developed for.

Table 2.5: Overview of empirical models for whole countries

Country Authors

Developed countries

1 United Kingdom [START_REF] Godley | Demand, inflation and economic policy[END_REF], [START_REF] Burgess | A dynamic model of financial balances for the United Kingdom[END_REF] 2 United States [START_REF] Godley | Seven unsustainable processes: Medium-term prospects and policies for the United States and the world[END_REF], Godley and Zezza (2006) 3 Denmark Godley and Zezza (1992b), [START_REF] Byrialsen | An Empirical Stock-Flow Consistent Macroeconomic Model for Denmark[END_REF], [START_REF] Byrialsen | QMDE: A Quarterly Empirical Model for the Danish Economy[END_REF] 4 Greece Papadimitriou, Zezza, and Nikiforos (2013), Papadimitriou, Nikiforos, and Zezza (2013), Papadimitriou, Nikiforos, and Zezza (2014) 5 Ireland Kinsella and Aliti (2013), [START_REF] Kinsella | Towards a stock-flow consistent model for Ireland[END_REF] 6 Portugal [START_REF] Sousa | A stock-flow consistent model of the Portuguese economy[END_REF] 7 Austria [START_REF] Miess | Extension of the empirical stock-flow consistent (SFC) model for Austria[END_REF] 8 Italy Passarella (2017), Zezza and Zezza (2020) 9 6 Mexico Nalin and Yajima (2020) [START_REF] Godley | Demand, inflation and economic policy[END_REF], using this theoretical framework in an empirical case of the economy of the United Kingdom, found that the private sector's financial balance was generally small and stable. It led to the "Twin Deficit Hypothesis" of the New Cambridge view. Due to a small and stable private sector balance, the trade deficit would equal the government deficit.

In other words, an increase in the government deficit would lead to a rise in the trade deficit.

Some parameters used in the model are estimated econometrically. Godley and Zezza (1992b) have developed a model for Denmark. It includes a representation of stock variables which are interrelated with flow variables. The model is simulated to analyse how the real economy reacts to the financial side in reality and uses it to examine some medium-term forecasting.

After joining the Levy Economics Institute of Bard College, Godley applied the same approach to the US economy, which contributed to predicting the recession in [START_REF] Tarp | Social Accounting Matrix for Vietnam[END_REF]and 2008[START_REF] Godley | Seven unsustainable processes: Medium-term prospects and policies for the United States and the world[END_REF] analysed the source of US growth and examined fiscal policy, foreign trade, private income expenditure, and borrowing. Then, he identified seven unsustainable processes in the US economy: "(1) the fall in private saving into ever deeper negative territory, (2) the rise in the flow of net lending to the private sector, (3) the rise in the growth rate of the real money stock, (4) the rise in asset prices at a rate that far exceeds the growth of profits (or of GDP),

(5) the rise in the budget surplus, (6) the rise in the current account deficit, (7) the increase in the United States' net foreign indebtedness relative to GDP" (p.4). The paper concluded that the US would likely enter an era of stagnation, and it will become necessary both to relax the fiscal stance and increase exports relative to imports. Godley and Zezza (2006) pointed out that the US economy has relied too much on the growth of lending to the private sector to compensate for the negative effect on aggregate demand of the growing current account deficit. However, this growth in lending cannot continue indefinitely because the personal sector has been considered with different threats, such as falling house prices, the excessive burden of interest or a collapse in the dollar exchange rate.

The Levy Institute has published a series of papers that addressed the sustainability of driving US growth with increasing private and public deficits and policy responses to the financial crisis. More recently, this "New Cambridge" approach has been used by the Levy Institute's researchers for Greece (Papadimitriou, Zezza, and Nikiforos, 2013). They developed a SFC model for Greece by using the quarterly data from 2000 to 2012. The work explores the implications of different economic policies on the Greek economy. It allows us to take into account the determinants of income, the impact of spending and saving on the financial structure of the economy, and then, in turn, affect the decisions of each sector. Papadimitriou, Nikiforos, and Zezza (2013) analyse the effect of austerity policies on the Greek economy using this model. They argue that prolonged austerity will result in a continuous fall in employment, GDP and higher public deficit and debt. In order to increase employment A mixed model of DSGE and SFC framework for South Africa has been published by [START_REF] Makrelov | Balance sheet changes and the impact of financial sector risk-taking on fiscal multipliers[END_REF]. South Africa's new SFC model is developed in which a financial sector with four financial instruments is integrated with the real sector. The paper analyses the implications of financial sector dynamics for fiscal expenditure multipliers in recessionary conditions. The fiscal policy will affect the economy through balance sheet effects. Higher government expenditure increases aggregate demand in the economy. Firstly, higher government expenditures contribute to reducing the perceived probability of default on financial institutions' loans, increasing asset valuations, and leading financial institutions to reduce interest rate spreads.

Secondly, consumption grows due to the expectations of higher future wealth and a reduction in credit constraints. Thirdly, stronger balance sheets across institutions and lower interest rates increase investment. The positive relation between growth and balance sheet valuations creates financial accelerator effects through its impact on financial sector risk-taking.

Escobar-Espinoza (2016) has developed an applied SFC model for Colombia. The model is estimated using annual data for the last 15 years and follows the tradition of applied macroeconomic models developed by Papadimitriou, Zezza, and Nikiforos (2013). The author uses the model to explore the implications of alternative economic policies for Colombia.

Le Héron and Yol (2019) focus on the role of remittances, which contribute to the disposable income of the private sector in a small country, Moldova. They build a SFC model with parameters taken from other models in the literature or calibrated based on country data.

a theoretical perspective and theoretically analyse the exchange rate's role in Mexico's development for the period 2004-2019. The hypothesis was the balance sheet effect due to an increase in external debt in the non-financial corporate sector; higher foreign debt would affect private investment after episodes of real currency depreciation. They simulate the 2014 fall in the Mexican peso generated by the drop in oil prices to replicate stylised facts for Mexico for the period under investigation. They showed that currency undervaluation does not benefit investment, consumption, and output.

Developing empirical SFC models

The development of a "full empirical SFC model" certainly raises several methodological issues.

However, only a few contributions cover the methodology for building an SFC empirical model for a whole country. Passarella (2019) shows how to develop a simple (medium-scale) empirical SFC dynamic model that enables accounting consistently for the evolution of financial stocks and flows across sectors. The pioneering theoretical work inspires by Godley and Lavoie (2007b). The model structure builds upon macroeconomic principles and available time series for macro variables rather than microeconomics' first principles.

Recently, [START_REF] Zezza | On the design of empirical stock-flow consistent models[END_REF] In general, the development of an empirical SFC consists of five main steps [START_REF] Nikolaidi | Post-Keynesian stock-flow consistent modelling[END_REF].

• Identify sectors/assets to be modelled

• Construct the stock matrix (balance sheet) and flow matrix of the economy

• Write down accounting identities (implied by the accounting)

• Write down behavioural equations (behaviour of the sectors)

• Simulation

After having the model, simulating an empirical SFC model usually will follow some steps as follows:

• Simulate the model

Conclusion

The present chapter introduced the methodology of SFC modelling and the general theoretical and empirical SFC literature. SFC modelling has three main characteristics. First, SFC models, including stocks and flows of the economy, are based on accounting consistency.

Second, they consider both the real and financial side of the economy, and it also represents the main advantage of this approach. It includes the interactions between the real and financial sides, which are essential for the dynamic of the model showing path dependency.

Finally, the closure or behavioural specifications, representing the behaviour of sectors in the economy, are post-Keynesian. This modelling approach is chosen in this thesis as it has several features above that will be appropriate in the context of Viet Nam, a small open economy and fully financially integrated into the global economy.

SFC models emerged in the last decade, especially after the GFC in 2008, as a popular methodological approach for researchers in macroeconomics. Theoretical SFC literature has grown up that attempts to address issues such as financialisation, open economies and policy.

Although the empirical SFC literature is relatively large and varied, at the time of writing, few studies have developed for developing countries, especially none for Asian countries. Filling this gap in the literature is one of our motivations for this research.

This chapter allows us to understand how to step-by-step develop an empirical SFC model for a whole country. It consists firstly of working with real data and coping with several issues to construct the accounting structure of the model adopting the standards of the SNA 2008. Secondly, the structure of the model will be designed with respect to SFC principles.

Then, the closures of the model and behavioural specifications must respect the theoretical meaningfulness (economic theory) and take into account the structural characteristics of the economy. We are aware of the time-consuming of this approach to developing an empirical SFC model. It requires not only knowledge of economics but also national accounting principles and econometrics [START_REF] Zezza | On the design of empirical stock-flow consistent models[END_REF]. However, we believe this model can allow us to address different subjects and become a useful macroeconomic analysis and policy simulation tool.

As mentioned above, the development of our model starts with the construction of the stock and flow matrices. Thus, the next chapter is devoted to the accounting structure for the SFC model for Viet Nam. Since there are not yet either stock accounts or non-financial accounts (transaction matrix) of institutional sectors, we have to "build from scratch" these matrices for our study. We follow international and national accounting system guidelines and collect data from different sources.

Chapter 3

Data and Accounting structure: Achievements and Limitations

Introduction

As mentioned in Chapter 2, the first step of developing an empirical SFC model is to construct the balance sheet and flow matrix. For most countries whose data are available, the balance sheet data are published in the financial accounts of institutional sectors. To the best of our knowledge, there are not yet institutional sector stock accounts or estimations of national wealth for the Vietnamese economy. Regarding the transaction flows data, a social accounting matrix (SAM) allows to capture of products and monetary (incomes and expenditures) flows of an economy in a year and respects the accounting consistency. The SAM methodology was introduced by Richard Stone [START_REF] Stone | Social Accounting: The State of Play[END_REF] and was widely used for computable general equilibrium (CGE) models. As mentioned above, the CIEM, with the support of international organisations, constructed Vietnamese SAMs for the years 1999 [START_REF] Tarp | Social Accounting Matrix for Vietnam[END_REF], 2000 [START_REF] Tarp | A New Social Accounting Matrix for the Year[END_REF], 2003 [START_REF] Henning | A Vietnam Social Accounting Matrix (SAM) for the Year[END_REF], 2007 [START_REF] Arndt | A 2007 social accounting matrix (SAM) for Vietnam[END_REF], 2011 [START_REF] Dang | Social accounting matrix for Vietnam[END_REF] and 2012 [START_REF] Dang | A 2012 Social Accounting Matrix (SAM) for Viet Nam[END_REF]. However, these SAMs did not develop the details of financial institutions and transactions of agents' assets and liabilities.

Given that SFC models have to respect the accounting principles, in our model, we decide to rely on the international guidelines of the system of national accounts and collect the data The aim of this chapter is twofold. Firstly, we attempt to explain how we base on SNA 2008 and the economic structure to develop the balance sheet and flow matrix and how to cope with two main issues that come up when combining different data sources. The first issue is about achieving the accounting consistency. [START_REF] Zezza | Stock-Flow Consistent Macroeconomic Models: Theory, Practice and Applications[END_REF] proposed two strategies which may be adopted. The first solution could assume the sources which are measured more accurately, then add the discrepancy to other sources. The second solution is to treat the discrepancies as unexplained exogenous variables. However, such exogenous discrepancies projected for model simulations will increase the degree of arbitrariness of model projections. Another issue while dealing with data from different sources is how to estimate a stock when only flow data are available or how to compute payments between sectors based on the available data for the stock of assets and liabilities of each sector (Zezza and Zezza, 2020). Some simplification hypotheses are made to deal with this problem.

The second objective of this chapter, as the starting point for empirical SFC modelling, is a realist one -an understanding of the subject is to analyse some insights from the data, which will have implications for modelling the Vietnamese economy in the next chapter.

The outline of this chapter is as follows. After this introductory section, we first present some main principles of the SNA 2008 related to the sequence of national accounts and classification of institutional units in Section 3.2. Section 3.3 explains the data construction process. Section 3.4 shows some stylised facts from the data. Finally, Section 3.5 concludes this chapter.

National accounting

Stocks, flows and accounting rules

The SNA is a system of accounts designed to measure stocks and flows in the economy (SNA 2008). While stocks measure economic value at a point in time, flows measure changes in economic value over a period of time. Stocks appear on the balance sheets. The flow accounts in the full sequence of accounts for institutional sectors consist of the current accounts, which deal with production, income and use of income, and the accumulation accounts, which show all changes between two balance sheets. The accounting rules have been specified to ensure a consistent system. In other words, all flows must capture the changes in the value of stocks between two points in time.

Stocks are a holding of assets and liabilities at a point in time, recorded in a balance sheet compiled in respect of the beginning and end of the accounting period. Stocks result from the accumulation of flows during the period. According to the SNA, an asset is defined as a store of value representing a benefit or series of benefits accruing to the economic owner by holding or using the entity over a period of time. There are non-financial and financial assets.

However, financial assets will have corresponding financial liability. A liability is defined as when the debtor is obliged to pay a payment or series of payments to the creditor.

SNA defined flows as the creation, transformation, exchange, transfer or extinction of economic value. Flows imply changes in the volume, composition, or value of an institutional sector's assets and liabilities. Economic flows consist of transactions and other flows. A transaction must be an interaction between institutional units. However, in reality, the value of an asset or a liability can be affected by other flows that do not realise between institutional sectors, such as the changes in value due to the price changes (revaluation effect).

The flows and stocks are grouped according to the classification hierarchy of the SNA. The sequence of accounts will be explained in detail in the following subsection. All entries in the accounts have to be measured in terms of money. Most business and government accounting refer to complete years. Flows and stocks must be recorded consistently with respect to the basic accounting framework of the SNA, which is quadruple accounting. Indeed, it is also the basic principle of SFC models.

In general, the SNA derives from broad bookkeeping principles. Three principles are as follows:

(i) Vertical double-entry bookkeeping used in business accounting: each transaction leads to at least two entries, traditionally referred to as a credit entry and a debit entry. It implies that the total of all credit entries and that of all debit entries for all transactions are equal.

Except for the revaluation flows, it will enter directly into changes in the net worth of the institutional sector. Regarding stocks, the total value of assets owned by an entity equals the total value of liabilities plus net worth. This principle allows us to check the consistency of accounts for a single unit.

(ii) Horizontal double-entry bookkeeping: it represents the consistency between different institutional units (i.e. transaction by counterparties).

(iii) Quadruple-entry bookkeeping results from both the vertical and horizontal double-entry bookkeeping. Especially the SNA considers the rest of the world account as a pseudo-sector.

The quadruple flows within the economy and with the rest of the world are completely balanced. The balance of payments accounts show the consolidated position of all domestic sectors relative to the rest of the world.

Sequence of accounts

As an economy is a general equilibrium system, all economic activities are interdependent, and all transactions between different institutional sectors are taking place continuously and simultaneously. Following the system of national accounting (SNA), the sequence of flow In this chapter, we will describe each account's main items, which are also included in our accounting framework. Starting with the production account, the production process is defined as the activity that uses inputs (labour, capital and intermediate inputs) to produce outputs of goods and services. Gross value added is the value of output less the value of intermediate consumption. Thus, value-added represents the contribution of labour and capital to the production process.

According to the SNA 2008, the concept of gross domestic product (GDP) for the economy as a whole is that it should measure the total gross value added from all institutional units resident in the economy. It is related to the production measure of GDP. Indeed, GDP can be calculated by three approaches: production, expenditure and income. The production measure of GDP will include taxes on production. The generation of income account represents a further extension or elaboration of the production account, which records the uses of value added. The main charges of producers are compensation of employees payable to workers employed (wages), indirect taxes (taxes as a result of engaging in production), and labour contributions). After deducting different charges, we obtain the operating surplus or deficit accruing from production before considering any interest or charges related to financial assets/liabilities. Interest is a form of income receivable by the owners of certain kinds of financial assets, such as deposits and loans.

The secondary distribution (redistribution) of income account shows how an institutional sector's balance of primary incomes is transformed into its disposable income. This account consists of current transfers, which are transactions between institutional sectors. Three main kinds of current transfers are: (i) Current taxes on income, wealth, etc.; (ii) Social contributions and benefits; (iii) Other current transfers. The disposable income is the balancing item in the secondary distribution of the income account. It is the sum of the balance of primary incomes of an institutional sector and all current transfers receivable minus all current transfers payable by that sector. The allocation of disposable income of each sector between final consumption and saving will be recorded in their use of income account. The final consumption mainly takes place in the household and the government sector.

After the current accounts, we arrive at the accumulation accounts, which begin with the capital account. The capital account records transactions in non-financial assets, which implies changes in the values of assets held by institutional sectors. The financial account records transactions in financial assets and liabilities. The same convention is followed in the accumulation accounts. The sector's net financing capacity/need will correspond to that sector's net lending/borrowing position. If the amount is negative, it represents a financing need and net borrowing. It shows the amount of the resources remaining that need to be borrowed. As mentioned above, the effects of price changes are recorded in the revaluation account. These accumulation accounts impact the balance sheet by changing the net worth of an institutional sector from the beginning to the end of the accounting period.

Institutional units

According to the definition of SNA, an institutional unit is defined as "an economic entity that is capable, in its own right, of owning assets, incurring liabilities and engaging in economic activities and in transactions with other entities". The SNA 2008 provides the conceptual basis for allocating a unit to the appropriate sector (Figure 3.2). The first notion is the residency of each institutional unit. The concept of economic territory in the SNA coincides with that of the BOP. Thus, we can use the data from the BOP for the rest of the world account.

Once non-resident units/sectors are set aside, only resident sectors remain. Then, a question determines the household sector. The allocation continues with the unit being a market or non-market producer, controlled by the government and producing financial services. The government is unique with the principal functions of government of assuming responsibility for providing goods and services to the community, collecting taxes, and redistributing income.

The financial sector consists of the central bank and other subsectors. The SNA 2008 defines the central bank as the national financial institution exercising control over key aspects of the financing system via monetary policies.

Following the classification and the availability of data, in our model, each resident institutional unit is classified into one and only one of these sectors:

• Non-financial corporations (Firms)

• Central Bank According to the IMF, statistics are collected based on economic objectives, functions and behaviour. Thus, some functions of the central bank impact its balance sheet.

• Issuing of currency

• regulating the money supply (monetary policy)

• acting as the banker of the government

• holding the country's foreign reserves (exchange rate policy)

The simplified balance sheet of the central bank, according to the IFS dataset, is defined as follows: To obtain the simplified balance sheet of the banking system, we add the simplified balance sheet of the central bank and commercial banks. It gives as follows: The positive sign means an asset, and the negative one means a liability of the sector holder.

L G CB + L B CB + R CB + L P CB + R B + D CB B = C + D CB B + L B CB + T → L G CB + L P B + R CB + R B = C + T Then,
The difference between assets and liabilities gives the net worth of the institutional sector. As mentioned above, according to the stock consistency principle, for each financial instrument, the sum of the value of assets should be equal to that of liabilities. As a consequence, the total net worth of the economy is equal to the value of the non-financial assets.

Regarding the non-financial assets, we distinguish the public and private capital stock. Then in private capital stock, we try to separate the capital stock of firms and that of households.

We suppose that only firms accumulate inventories. In our model, the value of non-financial assets should evolve according to the perpetual inventory method. It means that the value of the current period (K t ) is defined by cumulating flows (I t ) to the value of the previous period (K t-1 ) and adjusting for the depreciation of capital (δK t-1 ) and the variation of capital prices

(∆p K * k t ). K t = K t-1 + I t -δK t-1 + ∆p K * k t
Regarding the variable Inventories, there is no data on the initial stock. We set it to 0 in 1987, just before the first available point in the database of the World Bank. Then, the stock

K k f p K k g p K k h p K k Inventories p K 12 k 12 p K 12 k 12 Intl. reserves RES us xr -RES us xr 0 Cash -H H 0 Bank's Reserves -M B cb M B cb 0 Governments's Deposits -GM cb -GM b GM 0 Dong Deposits DM f -DM DM h 0 Foreign deposits F M f us xr F M g us xr F M h us xr -F M us xr 0 Bonds B cb B b -B B h 0 Advances LB cb -LB cb 0 Loans -L f L -L h 0 Foreign loans -F L f us xr -F L b us xr -F L g us xr F L us xr 0 Equity -p E E f -p E E b p E E h p E E r 0 Foreign direct investment -p F DI F DI us xr p F DI F DI us xr 0 Other accounts r/p* OT A f OT A cb OT A b OT A g OT A h OT A r 0 Net Wealth NW f NW cb NW b NW g NW h NW r p K k + p K 12 k 12 *r/p: receivable/payable
of inventories (K 12t ) is constructed following the perpetual inventory method. Moreover, we suppose that there is no depreciation in inventories.

K 12t = K 12 t-1 + i 12t + ∆p IN V * K 12 t-1
Non-financial assets are taken from The Investment and Capital Stock Dataset, International Monetary Fund.

International reserves are taken from International Financial Statistics. The central bank is supposed to hold all international reserves.

Cash is taken from International Financial Statistics as currency outside banking institutions.

We suppose that households hold cash provided by the central bank. We suppose that all equities in the economy are held by households and the foreign sector, which is considered the portfolio investment.

Foreign direct investment stock and flow are obtained from the United Nations conference for trade and development (UNCTAD).

The flow matrix in our model consists of the uses-resources table, which records non-financial transactions (Table 3.5), and the flow of funds which records financial transactions (Table 3.6).

Uses-resources table

In the uses-resources table, the plus sign denotes the sources of funds (inflows), and the minus one is for uses of funds (outflows). The horizontal flow consistency implies that for each type of transaction, the sources have to correspond to the uses of funds. In other words, the sum of each transaction row is equal to zero. In addition, the vertical flow consistency requires that the sum of each column of the table is also equal to zero. It means that the net financing capacity/need leads to the changes in different financial assets held by each institutional sector.

Input data for the uses-resources table are taken from the main sources as follows:

i) The Social Accounting Matrix and the Input-Output tables for the years 1997, 2000, 2003, 2007, 2012, and 2015 were developed by GSO, CIEM and other international organisations.

ii) The integrated economic accounts (IEA) published by GSO (1995GSO ( -2002) ) iii) The State budget revenue and expenditure from the Ministry of Finance (MOF)

iii) The State Bank of Viet Nam (SBV) dataset iv) The World Development Indicators (WDI)

v) The International Financial Statistics (IFS)

vi) The Balance of Payments from IMF. We note that the rest of the world account records the same transactions as the balance of payments. However, this account records from the perspective of the rest of the world, while the balance of payments records from the perspective of residents.

At the top of the uses-resources table, we represent all trade transactions, which consist of exports and imports. Then, we pass to all remaining accounts of the sequence of flow accounts. The value of exports and imports is taken from GSO. The export and import price are calculated from the nominal value of exports and imports (at current prices) and the volume of exports and imports (at a constant price in 2010).

We start with the production account, which shows the output of domestic production and inputs to it (intermediate consumption). The balancing item in the production account is the gross value-added. We have to estimate the serie of gross value-added from GDP. By definition, GDP can be obtained by three approaches (SNA 2008).

• Demand approach: GDP is defined as the sum of household consumption, current government expenditures, private and public investment, net exports and changes in inventories.

• Income approach: GDP is defined as the sum of the income earned by all the factors of production in an economy, including the wages paid to the households, gross operating surplus, interest payments and taxes received by the government.

• Production approach: GDP is defined as the total value of economic output and deducts the cost of intermediate goods and the taxes on production.

Thus, the value-added is given by:

V A = GDP -T OP (3.1)
where T OP are taxes on production (indirect taxes).

In order to obtain the value-added of each institutional sector, we have to base on the GDP by types of ownership and kinds of economic activity. We implicitly assume that financial services and public services are associated with the commercial banks sector and the government, Given that interest payments of each period (IN T t ) are generated by stocks of assets at the end of the previous period, it is determined by multiplying the interest rate relevant in the period t (r t ) by the stock of assets of t -1 (A t-1 ).

IN T t = r t * A t-1
The redistribution of income account is calculated by adding to and subtracting direct taxes (income taxes, profit taxes), social benefits and other current transfers from private to abroad and from abroad to public/private sectors to the primary income. Then, we get to the gross disposable income of each sector. Direct taxes and government transfers are taken from MoF's data on the State budget. The uses of income account shows how each agent uses their disposable income for current consumption and get the gross saving. Final consumption, investment, and changes in inventories come from GSO. The price of these elements is deduced from the nominal values and the volume variables.

Finally, the capital account in the sequence of accounts records the acquisition of non-financial assets through investments (in fixed capital and inventories). The balancing item of this account represents the Net financing capacity of the sector. We distinguish in this usesresources table the current public expenditure, which is the government consumption, and the public investment, which corresponds to the net acquisition of non-financial assets.

Imports p IM im p IM im Exports -p X x -p X x Trade balance (X -IM) -T B Production p Y q f p Y q b p Y q g p Y q h p Y q Intermediate Consumption -θ f p Y va f -θ b p Y va b -θ g p Y va g -θ h p Y va h -p Y ic Value added p Y va f p Y va b p Y va g p Y va h p Y va Wages + Compensation from abroad -λ f wN -λ b wN -λ g wN -λ h wN -W B r 0 +wN + W B r Labor/social contributions -α f W B f -α b W B b -α g W B g -α h W B h 0 +SOC Indirect taxes (VAT included) -τ r p IM im τ r p IM im + T OP T OP Gross operating surplus F f F b F g F h FT Interest on gov deposits -r m GM cb -1 -r m GM b -1 r m GM -1 0 Interest on deposits r m DM f -1 -r m DM -1 r m DM h -1 0 Interest on bonds r b B cb -1 r b B b -1 -r b B -1 r b B h -1 0 Interest on advances r cb l LB cb -1 -r cb l LB cb -1 0 Interest on loans -r l L f -1 r l L b -1 -r l L h -1 0 Interest on foreign loans -r f l F L f us-1 xr -1 -r f l F L b us-1 xr -1 -r f l F L g us-1 xr -1 r f l F L us-1 xr -1 0 Dividends -φF f -1 φF f -1 0 Central Bank's profits -F cb F cb 0 Primary income balance YP f YP b YP g YP h YP Income taxes -τ f Y P f -1 -τ b Y P b -1 DT -τ h Y P h -1 0 -τ w γ ICT W B Social benefits -γ SBE Y P h γ SBE Y P h 0 Cur. tr. from abroad (public) T R r g -T R r g 0 Cur. tr. to abroad (private) -T R p r T R p r 0 Cur. tr. from abroad (private) T R r p -T R r p Gross disposable income YD f YD b YD g YD h YD Consumption -p C c -p C c Public current expenditure -p G g -p G g Gross savings S f S b S g S h S Gross fixed capital formation -p K i f -p K i g -p K i h -p K i Changes in inventories -p K 12 i 12 -p K 12 i 12 Net fin. capacity NFC f 0 NFC b NFC g NFC h NFC r 0

Flow of funds

The flow of funds account describes the transactions in assets. It shows how each sector allocates its financing capacity of finances its financing needs. In contrast to the uses-resources table, the signs attached to the 'flow of funds' entries are counter-intuitive. The negative sign represents the acquisition of a financial asset cumulating to the existing stock of assets. The positive sign represents the acquisition of liabilities.

For some flow components, it relies on period-to-period changes in the stock or from-whomto-whom assumptions when flow data are not available. There is a mismatch between Net financing capacity, calculated from the real side, and Net lending/borrowing, calculated from the stock data. This discrepancy could be explained by the difficulties of measuring and obtaining the data related to the financial market. We add residual variables "Other accounts r/p" to solve this issue.

∆OT A f ∆OT A cb ∆OT A b ∆OT A g ∆OT A h ∆OT A r 0 Net lending/Borrowing NLP f 0 NLP b NLP g NLP h NLP r 0 (**)
The term Changes in other accounts r/p is used to balance the difference between Net financing capacity, which is calculated from the real side, and Net lending/borrowing, which is calculated from the stock data

Integration of matrices

The following table shows the integration of the balance sheet, the changes in values of assets/liabilities of each sector due to flows from the previous period to the current period and the revaluation effects due to the price variation.

The first row represents the initial net wealth of each institutional sector which corresponds to that of the previous period. The net wealth at the end of the current period is given by adding to the beginning net wealth the change in assets/liabilities from transactions and the change from revaluations. Each sector can raise its net wealth by acquiring non-financial or financial assets. We assume p K -the price of tangible capital, and we do not distinguish between public and private capital for simplification. p K 12 is the price of inventories.

In our model, regarding the financial assets, we assume that the prices of equities issued by

∆OT A cb ∆OT A b ∆OT A g ∆OT A h ∆OT A r 0 Revaluation Non-financial assets k f -1 ∆pK k g -1 ∆pK k h -1 ∆pK k-1∆pK Inventories k12 -1 ∆pK 12 k12 -1 ∆pK 12 Intl. reserves RESus -1 ∆xr -RESus -1 ∆xr 0 Foreign deposits F M f us-1 ∆xr F M g us-1 ∆xr -F Mus -1 ∆xr 0 Foreign loans -F L f us-1 ∆xr -F L b us-1 ∆xr -F L g us-1 ∆xr F Lus -1 ∆xr 0 Equity -E f -1 ∆pE -E b -1 ∆pE E h -1 ∆pE E r -1 ∆pE 0 FDI -F DIus -1 (xr-1∆pFDI F DIus -1 (xr-1∆pFDI 0 +pFDI -1 ∆xr) +pFDI -1 ∆xr) 0 Net Wealth NW f NW cb NW b NW g NW h NW r pKk + pK 12 k12

Input-Output table

Considering the research questions in the next part of this thesis, it is necessary to disaggregate the production account into the different sectors. It allows analysing of the sectoral composition of the economy. The details of the production, especially the intermediate consumption, will be represented through the technical coefficient matrix, which shows the interlinkages between productive sectors such as agriculture, energy, industry, financial services, public services and non-financial services.

Production p Q q AGR p Q q EN ER p Q q IN D p Q q F IN p Q q GOV p Q q SER p Q q Intermediate Consumption p IC ic AGR p IC ic EN ER p IC ic IN D p IC ic F IN p IC ic GOV p IC ic SER p IC ic Value added p Y va AGR p Y va ENER p Y va IND p Y va FIN p Y va GOV p Y va SER p Y va
The simplified Input-Output table ( Then, Table 3.10 represents the input coefficients for each activity sector. It represents the scale of each sector used to contribute to the production in other sectors. a ij is defined as the input of sector i required to produce one unit of production of sector j. This coefficient is determined by dividing the intermediate consumption of sector i by the production of sector j.

a ij = IC ij p Q q j

Three financial balances

As mentioned in Chapter 2, the "three financial balances" approach pioneered by Wynne Godley allows us to analyse the implications of different components of aggregate demand in terms of the financial balances of the leading institutional sectors to economic growth.

We consider three sectors: the private sector (firms, commercial banks and households), the government sector and the external sector. The accounting identity is given by:

P B = GB + BP
where P B is the net acquisition of financial assets of the private sector as a whole; GB is the government deficit, and BP is the external balance. in properly measuring the market value of financial instruments at a time of rapid financial innovation [START_REF] Zezza | On the design of empirical stock-flow consistent models[END_REF]. Our completed accounting structure sheds some light on several dynamics of the Vietnamese economy, allowing us to better understand the economy.

Thus, it feeds the development of our model in the next chapter.

After finishing the construction of stock and flow matrices, we continue the development of our empirical SFC model by writing the equation system (accounting and behavioural equations) in the next chapter.

the system used to characterise the economy. The resulting system proposes a framework that links the financial and real sectors of the economy and an interpretation of the channel transmission through which economic policies can affect these transactions.

Two main components of an empirical SFC model are (i) accounting equations implied by the accounting framework and (ii) behavioural equations representing the behaviour of the sectors. The balance sheet, displaying tangible assets and financial assets/liabilities and the flow matrix (with the real and financial flows associated with budget constraints of each sector), allows for deriving the first set of model equations: namely, accounting identities. As mentioned in Chapter 2, there are five main categories of behavioural assumptions. The first category will specify how each sector determines its expenditure (household's consumption, firm's investment, household's investment, public investment, exports and imports). The second one is related to how each sector finances its financing need. They will face different possible ways to finance. The third category of behavioural assumptions specifies how agents allocate their wealth among various assets. The fourth one is related to the financial system, which includes the monetary policy of the central bank, the behaviour of commercial banks and other interest rates or rate of return. Finally, we will describe the specification of wages, inflation and the price system. In addition, as our model is empirical, these equations should be statistically validated.

After estimating some parameters, we simulate the model. We compare simulated results with the actual data to examine the model's overall performance. It allows evaluating whether the model is able to explain/replicate the dynamics of the data to some extent before proceeding to simulate the model for the future.

The rest of this chapter is organised as follows. Section 4.2 explains the structure of the model. Section 4.3 details the estimations of the behavioural equations. Section 4.4 shows the overall performance with actual data. Finally, Section 4.5 concludes this chapter.

The second set of equations is the behavioural equations coupling with equilibrium conditions to close the model. The development of behavioural equations for each sector relies mainly on post-Keynesian theories and the analysis of the Vietnamese economy in Chapter 1.

Following a coherent way of thinking about the macroeconomy in terms of both theory and economic policies [START_REF] Arestis | Economic theory and policy: a coherent post-Keynesian approach[END_REF], the model will be divided into different blocks as follows:

• Output determination: The model is supposed to have a single product. The production is determined by demand, including domestic demand (public and private investment, public and private final consumption and change in inventories of firms)

and foreign demand (net exports). We consider possible supply-side constraints. A supply constraint is introduced through a simple Cobb-Douglas production function that determines the production capacity of productive sectors and affects production decisions.

• Investment and financing of firms: Firms have to decide how much to produce, how much to invest and how it will be financed by using retained profits, borrowing from banks or abroad, issuing equities or attracting FDI.

• Consumption, Investment and Portfolio choices of Households: The decisions of households essentially will deal with consumption, investment and accumulation of financial assets in the form of deposits, government bonds, firms' equities or other financial assets. Households can also borrow from commercial banks to meet their financing needs.

• Government and fiscal policy: The government collects taxes, receives other transfers or payments, and then consumes and invests. The government's current expenditures and public investment are exogenous as policy instruments. The public deficit can be financed by issuing bonds or borrowing from abroad.

• Central bank and monetary policy: The State Bank of Viet Nam (SBV) determines the refinancing rate as a monetary policy tool, provides advances to the commercial banks and manages international reserves. The central bank contributes to regulating financial markets.

• Commercial banks and financial system: Commercial banks provide credits to firms and households, but they also impose credit rationing on firm and household loans based on loan-to-value (LTV) and debt-to-income (DTI), respectively. They decide both the lending rate and the deposit rate based on a premium over the central bank's interest rate. Commercial banks also hold part of the government's bonds.

• Rest of the world and external dependence: Exports and imports depend on demand, relative prices and other relevant factors for the Vietnamese economy. The rest of the world contributes to financing the domestic economy through FDI, portfolio investment or foreign loans.

• Prices: The general price is a cost-push function (wage and import price). Price is affected by the demand via the output gap, which is represented as the ratio of actual output and potential output. Other prices in the system mainly depend on this general price.

• Asset prices: This block specifies the determination of different interest rates and rates of return of different financial assets in the model.

• Labour market: Wage and employment will be explained in this model block. Nominal wage affects prices and, therefore, inflation.

Main closures

In order to guarantee the accounting principles for each sector's financial account and the whole system, we have to decide on a financial instrument to close the capital account of each institutional sector (Table 4.1). It also allows us to link the financial and real sides of the economy.

The main closures of the model are the following:

• Firms finance all remaining their financing needs via FDI.

• Households will keep all remaining money once they have planned their consumption expenditures, investment and other financial assets. Households will buy all remaining equities from firms and banks.

• Central bank buys the bulk of the remaining government bonds. The changes in assets will correspond to the changes in liabilities of the central bank.

• The refinancing from the central bank balances the banks' accounts. In other words, refinancing acts as the residual buffer for banks. Banks increase the deposits with respect to the demand for dong deposits of firms and households. Banks provide credits demanded by firms and households.

• Government finance their public deficit (net financing needs) by debt. It can be domestic (bonds) or foreign debt.

• Rest of the world: The change in other net financial assets is determined by the net borrowing/lending position. The rest of the world satisfies all foreign loans demanded by the domestic sectors.

K k f p K k g p K k h p K k Inventories p K 12 k 12 p K 12 k 12 Intl. reserves RES us xr -RES us xr 0 Cash -H H 0 Bank's Reserves -M B cb M B cb 0 Governments's Deposits -GM cb -GM b GM 0 Dong Deposits DM f -DM DM h 0 Foreign deposits F M f us xr F M g us xr F M h us xr -F M us xr 0 Bonds B cb B b -B B h 0 Advances LB cb -LB cb 0 Loans -L f L -L h 0 Foreign loans -F L f us xr -F L b us xr -F L g us xr F L us xr 0 Equity -p E E f -p E E b p E E h p E E r 0 Foreign direct investment -p F DI F DI us xr p F DI F DI us xr 0 Other accounts r/p OT A f OT A cb OT A b OT A g OT A h OT A r 0 Net Wealth NW f NW cb NW b NW g NW h NW r p K k + p K 12 k 12
Close the sector's account (column)

Close the asset's line

Practical details

Before tackling the equation system, two main elements are essential for the model simulation:

the buffers and the redundant equation. According to Godley and Lavoie (2007b), the buffers are the essential flexible elements which enable the whole system to function in a world of uncertainty. For example, we assume that their deposits play the role of the buffer for the households sector. It means that households overestimate their disposable income and spend more than they should. Their financing capacity will be smaller than expected and affect their stock of deposits. This buffering item "generates a kind of autopilot whereby unexpected (and unwanted) stocks of money result in a corrective mechanism which comes into play during subsequent periods" (Godley and Lavoie, 2007b, p.292). In our model, we have to choose, for the financial account of each sector, one financial instrument to "close" the capital account of the corresponding sector.

The redundant equation or "unwritten" equation is important for the model function. This equation arises from the fulfilment of every other equation of the model. It need not be incorporated into the computation. Otherwise, the model would be overdetermined. However, this equation will be used to check whether the model is correct, i.e. respect all accounting consistencies.

Given a large amount of technical details of the model and thus, in order to make the reading of our system of equations easier, we present all accounting identities and behavioural equations of a block of output, then sector by sector, block of prices (real and financial) and finally block of the labour market. The behavioural equations with estimated parameters will be noted as "EQ.B.x". The exact functional form of these equations will be detailed later in Section 4.3.

Output determination

For simplicity, in our model, we suppose that the economy has a single good that can be used for intermediate consumption, final consumption, exports, and capital goods. The economy is demand-led. In other words, the demand determines production. The production decision of the productive sector is based on adaptive expectations. They decide their production level considering the sales expectations. However, given that they have a limited production capacity, a production constraint impacts their production decision. In addition, the integration of supply constraint into the model allows taking into account in further research different questions related to:

• resources constraints (land, water, ...)

• emissions by sectors (climate change problem)

• technical coefficients

• structural change

• interaction between supply and demand

The productive sector will produce what is demanded if the expected demand is lower than its capacity of production. On the contrary, they cannot produce what exceeds their capacity.

Thus, the level of expected output is given by:

q e t = min( va e st γ va , va e dt γ va ) (EQ.1)
where γ va is the part of value-added in the production, va e dt is the expected demand and va e st is the supply constraint.

Expected value-added could be adaptive and, thus, depends on past value-added. Firms are supposed to take into account the labour productivity growth (gr t ), which is represented as the ratio of value-added and the number of workers. The higher productivity growth leading to higher income per capita will increase global demand [START_REF] Shaikh | Capitalism: Competition, Conflict, Crises[END_REF].

va d st = va t-1 * (1 + prod grt ) (EQ.2)
In our model, the economy is demand-led. The real GDP (y t ) is defined as the sum of household consumption (c t ), government current expenditures (g t ), private and public investment (i f t , i g t , i h t ), net exports (x t -im t ) and changes in inventories (i 12t ).

y t = c t + g t + i f t + i g t + i h t + i 12t + x t -im t (EQ.3)
The economic growth rate (gr Y t ) can be written by:

gr Y t = y t -y t-1 y t-1 (EQ.4)
The nominal GDP is calculated as follows:

Y t = y t * p Yt (EQ.5)
where p Yt is GDP deflator. According to the production approach, the total nominal value-added is determined as the nominal GDP minus taxes on production.

p Yt va t = Y t + T OP t (EQ.6)
The demand will be satisfied by a part of imports.

q t = q e t -γ IM * im t (EQ.7)
The supply constraint is represented by a simple Cobb-Douglas production function.

va e st = A t k α L 1-α t (EQ.8)
By using the approximated linear relationship between the capital to labour ratio and the income share of labour, we estimate α

y t = A t k α L 1-α t 108 Chapter 4 4.2 The model → y t L t = A t k α L 1-α t L t → y t L t = A t k t L t α → ln y t L t = ln(A t ) + α * ln k t L t
OLS estimation gives: α = 0.404

We assume that the value-added is split among the different institutional sectors. Thus, the value-added of each institutional sector is defined as the share of the total value-added.

Value-added of firms

va f t = γ f V A * va t (EQ.9)
Value-added of banks

va b t = γ b V A * va t (EQ.10)
Value-added of government

va g t = γ g V A * va t (EQ.11)
Value-added of households will be a residual.

va h t = va t -va f t -va b t -va g t (EQ.12)
The intermediate consumption is determined as the difference between output and value-added.

IC t = Q t -V A t (EQ.13)
Given that Viet Nam has to import several intermediate goods to produce, the imported intermediate goods are defined as a part of total intermediate goods.

IC im t = γ im ic * IC t (EQ.14)

Investment and financing of firms

The gross operating surplus (i.e. profits) of firms (F f t ) are defined as the difference between the nominal value added from the production (V A f t ) and wages (W B f t ) and labour contributions (SOC f t ), and to this, we have to deduct import taxes (suppose that all imports are of firms T IM t ).

V A f t = p Y t va f t (EQ.15)
Wages paid to workers by firms are defined as a share of the total wage bill.

W B f t = λ f W B t (EQ.16)
Labour contributions paid by firms

SOC f t = α f γ SOC * W B f t (EQ.17)
Custom and other import duties are assumed to be a fraction of imports.

T IM t = τ r p IM t im t (EQ.18)
Profit of firms is given by:

F f t = V A f t -W B f t -SOC f t -T IM t (EQ.19)
In terms of financial assets, firms hold dong deposits in banks and deposits in foreign currency.

Thus, the interests on dong deposits received by firms annually are calculated as follows:

IT DM f t = r mt DM f t-1 (EQ.20)
Interest on a firm's foreign deposits paid by banks

IT F M f t = r f mt F M f us t-1 xr t-1 (EQ.21)
Regarding the liability side, firms borrow both from domestic banks and from abroad. They have to pay the interest on it. The interest payments on debt paid by firms to commercial banks are given by:

IT L f t = r lt L f t-1 (EQ.22)
Interest on foreign debt paid by firms to ROW

IT F L f t = r f lt F L f us t-1 xr t-1 (EQ.23)
Dividends are supposed to be paid by firms to the rest of the world as a proportion (φ) of corporate profits lagged one period.

DIV t = φF f t-1 (EQ.24)
Following the same sequence of SNA accounts, the primary income of firms is determined by:

Y P f t = F f t + IT DM f t + IT F M f t -IT L f t -IT F L f t -DIV t (EQ.25)
Profit tax paid by firms

F T f t = τ f Y P f t-1 (EQ.26)
Firm's saving is given by:

S f t = Y P f t -F T f t (EQ.27)
Firms use their saving to acquire fixed assets and inventories. Thus, the net financing need of firms is determined by the difference between the firm's savings, their investment in non-financial assets, and changes in inventories.

N F C f t = S f t -I f t -I 12t (EQ.28)
Firms' net investment is here represented as a fixed capital accumulation rate ( ∆k f

k f t-1
). It is modelled as a function of a constant which reflects animal spirits, the real lending rate (r lt -π t ) representing the financial condition or cost of borrowing and the capacity utilisation rate [START_REF] Bhaduri | Unemployment and the real wage: the economic basis for contesting political ideologies[END_REF] which is proxied by the ratio of the actual GDP to the potential GDP. A high capacity utilisation rate will lead firms to raise their capital stock by increasing investment. The cost of financing investment by bank loans has a negative impact on capital accumulation. The accumulation of capital also depends on the profit rate [START_REF] Kalecki | Selected essays on the dynamics of the capitalist economy[END_REF], which is defined as the gross operating surplus divided by the previous stock of capital (

F f t-1 K f t-2
) and the financial profitability is represented as the change in the equity price (

∆p E t p E t-1
).

On the one hand, the profit rate is essential for capital accumulation, given that profit is the primary objective of the firm's investment.

On the other hand, the Kaleckian concept of macroeconomic demand emphasises the period of financialisation in modern capitalism. Financialisation has had effects on (1) income distribution, (2) investment in capital stock, (3) consumption and (4) current account imbalances [START_REF] Hein | The Macroeconomics of Finance-Dominated Capitalism -and its Crisis[END_REF]. Financialisation has coincided with lower investment in capital stock.

Investors tend to shift from long-run growth objectives to short-term profitability through financial activities. Thus, financialisation decreases investment.

∆k f k f t-1 = f      ∆k f t-1 k f t-2 (+) ; y t-1 y * t-1 (+) ; r lt -π t (-) ; F f t-1 K f t-2 (+) ; ∆p E t p E t-1 (-)      (EQ.B.1)
The real stock of firm's fixed capital is defined by the perpetual inventory method.

k f t = (1 -δ f Kt )k f t-1 + i f t (EQ.29)
To estimate the potential GDP, we use the production function approach (IMF, 2019). In this approach, the production function is given as follows.

y * t = T F P t k 1-α t-1 L * α t (EQ.30)
where T F P t is the total factor productivity; L * t is the active population and k t-1 is the capital stock of the previous period. Capital stock is the sum of private and public capital.

k t = k f t + k g t + k h t (EQ.31)
The nominal investment of firms in non-financial assets

I f t = p K t i f t (EQ.32)
The real stock of inventories is supposed to be an exogenous part of past sales

k 12t = γ IN V * s t-1 (EQ.33)
The total sales are given by:

s t = c t + i f t + i g t + i h t + g t + x t + ic t (EQ.34)
Given that the real stock of inventories is determined as the accumulation of inventories over the past, the changes in inventories are calculated as follows:

i 12t = k 12t -k 12 t-1 (EQ.35)
The nominal changes in inventories On the asset side, we suppose that the demand for dong deposits held by non-financial firms increases with an exogenous growth rate.

I 12t = p K 12 t i 12t (EQ.36)
DM f t = DM f t-1 * (1 + γ f DM ) (EQ.37)
Thus, the change in dong deposits held by firms can be determined by:

∆DM f t = DM f t -DM f t-1 (EQ.38)
We assume that deposits in foreign currency held by non-financial firms are for trade. The stock in foreign deposits is therefore calculated as a share of the value of imports (IM t ) and exports (X t ).

F M f t = γ f F M * (IM t + X t ) (EQ.39)
The stock of foreign deposits (in USD) is determined by the following:

F M f ust = F M f t xr t (EQ.40)
The change in foreign deposits held by non-financial firms is for trade (in USD).

∆F M f ust = F M f ust -F M f us t-1
(EQ.41)

The change in foreign deposits (in VND) is determined by the following:

∆F M f t = ∆F M f ust * xr t (EQ.42)
In our model, firms can finance their investment by issuing equities held by households and the ROW, borrowing from domestic banks or abroad and via FDI.

The foreign debt of firms is a function of the interest rate differential corrected by the exchange rate variation. It also depends on firms' investment. Thus, the demand for foreign debt by firms can be written as follows:

∆ln(F L f t ) = f     r lt -r us lt - ∆xr t xr t-1 (+) ; ∆y t y t-1 (+)     (EQ.B.2)
The stock of foreign loans of firms (in USD) is determined by the following:

F L f ust = F L f t xr t (EQ.43)
The changes in foreign loans of firms (in USD) are defined by:

∆F L f ust = F L f ust -F L f us t-1
(EQ.44)

The changes in foreign loans of firms (in VND) are defined by:

∆F L f t = ∆F L f ust xr t (EQ.45)
Firms can also finance their investment needs by borrowing from commercial banks. The demand for loans from banks depends mainly on the cost of borrowing, which is the lending rate (r lt ). It also depends on the degree of indebtedness which is represented by the ratio between the loan amount and the firm's net wealth (

L f t-1 N W f t-1 ) ∆ln(L f D t ) = f      r lt (-) ; L f t-1 N W f t-1 (-)      (EQ.B.3)
As commercial banks impose credit rationing for firms' loans, they decide the level of the lending amount to firms based on a loan-to-value (LTV) ratio. It measures the relationship between the loan amount and the value of non-financial and financial assets securing the loan.

As LTV increases, it creates more risks for the firms. According to several commercial banks in Viet Nam, it limits LT V f to 70%. It means that commercial banks will satisfy the demand of firms for loans under 70% of their net wealth value.

The effective LTV is then determined by: LT V f t = min 0.7,

L f t-1 + ∆L f D t N W f t-1 (EQ.46)
The effective firm's loan amount is calculated as follows:

∆L f t = LT V f t * (p K t-1 * k f t-1 + p K 12 t k 12t + DM f t + F M f t ) (EQ.47)
The newly issuing equities of firms depend on the financing need from their investment and the lending rate, which is the borrowing cost.

∆E f t =   i f t (+) ; r l t-1 (-)   (EQ.B.4)
The stock of firm's equities is given by:

E f t = E f t-1 + ∆E f t (EQ.48)
We assume that the change in other net financial assets (∆OT A f t ) is projected exogenously. Firms finance their remaining financing need by FDI.

p F DI t ∆F DI ust xr t = N F C f t -∆DM f t -∆F M f ust xr t + ∆F L f ust xr t + p E t ∆E f t + ∆L f t -∆OT A f t (EQ.49)
The stock of FDI is given by:

p F DI t F DI ust xr t = p F DI t-1 F DI us t-1 xr t-1 + p F DI t ∆F DI ust xr t + p F DI t-1 F DI us t-1 ∆xr t-1 (EQ.50)
Finally, a firm's wealth is defined as the sum of all its assets and liabilities.

N W f t = p K t k f t +p K 12 t k 12t +DM f t +F M f ust xr t +OT A f t -L f t -F L f ust xr t -p E t E f t -p F DI t F DI ust xr (EQ.51)

Consumption, Investment and Portfolio choices of Households

Vietnamese households use their disposable income to consume, invest and accumulate financial assets in dong deposits, foreign deposits, government bonds, firm equities or other financial assets. Households also can borrow from commercial banks to finance their financing needs.

The gross disposable income of households (Y D h t ) consists of mixed income which is the difference between the nominal value-added (V A h t ) and the paid wage (W B h t ); domestic wages which is defined as a product of the wage rate and the total number of workers; compensation of employees from abroad denominated in local currency which is exogenous (W B r t ); government transfers which is projected as a exogenous part of GDP (SBE t ), remittances (T R r pt ), received interest on financial assets (IT DM h ,IT B h ); less social contribution (SOC h t ); income taxes which are a proportion of income (ICT t ), profit taxes (F T h t ) which are levied in a proportion of households' profit, interest paid on loans (IT L h t ) and transfers to abroad (T R p rt ). The nominal value-added of the household sector is calculated as follows:

V A h t = p Y t va h t (EQ.52)
The wage paid by the household sector

W B h t = λ h W B t (EQ.53)
The income from abroad paid to Vietnamese households is considered exogenous and is defined as a ratio of the world GDP (Y * t ).

W B r t = γ W BR Y * t (EQ.54)
Social contributions paid by the household sector are a part of the wages they pay.

SOC h t = α soc * γ wb soc W B h t (EQ.55)
The operating surplus and mixed income of households (F h t ) are defined as the surplus from production before taking account of other capital income.

F h t = V A h t -W B h t + W B t + W B r t -SOC h t (EQ.56)
As households hold deposits in Viet Nam dong in commercial banks and government bonds, they will receive interest on dong deposits.

IT DM h t = r mt DM h t-1
(EQ.57)

Households also hold deposits in foreign currency; they will receive the interest on foreign deposits.

IT F M h t = r f mt F M h us t-1 xr t-1 (EQ.58)

They will also get the interest on bonds paid by the government.

IT B h t = r bt B h t-1
(EQ.59)

Because households borrow from commercial banks, they have to pay the interest.

IT L h t = r lt L h t-1
(EQ.60)

The SNA defines the primary income as income resulting from their involvement in the production and their ownership of assets. Thus, the primary income of households is calculated as follows:

Y P h t = V A h t -W B h t + W B t + W B r t + IT DM h t + IT B h t -IT L h t (EQ.61)
Households have to pay taxes on their primary income. We distinguish the taxes paid by individual entrepreneurs (F T h t ) and the taxes on wages (ICT t ).

F T h t = τ h Y P h t-1
(EQ.62)

Personal income tax

ICT t = τ w γ wb ict W B t-1 (EQ.63)
Transfers from the private sector abroad are supposed to be exogenous. It is represented as a part of the nominal GDP.

T R p rt = γ rp * Y t (EQ.64)
Regarding remittances, [START_REF] Lucas | Motivations to Remit: Evidence from Botswana[END_REF] distinguished three main motives of migrants to send remittances: pure altruism, pure self-interest and tempered altruism or enlightened self-interest. According to the altruistic model, migrants care about the well-being of those who stayed in the origin country (especially in the case of recession). Remittances contribute to the disposable income of the households and then increase their consumption (Vargas-Silva and Huang, 2006). The pure self-interest motive argument relies on the theory of portfolio choice. Remittances are considered a part of the family's wealth. People who receive in the host country can use remittances to invest and look for a return on investment [START_REF] Adenutsi | Macroeconomic Determinants of Workers' Remittances and Compensation of Employees in Sub-Saharan Africa[END_REF]. They tend to send more in the optimistic economic situation in the origin country.

The third reason for remittances can be mixed with the two motives above. However, from a macroeconomic point of view, some macroeconomic determinants of remittances are related to socio-demographic, economic and institutional factors [START_REF] Rahman | Macroeconomic Determinants of Remittances in South Asian countries: A Dynamic Panel Study[END_REF][START_REF] Hagen-Zanker | The determinants of remittances: A review of the literature[END_REF]. The migrant stock is considered a crucial determinant of remittances.

The higher the number of workers abroad is, the greater the remittances. The exchange rate, the deposit rate and the level of financial development affect the remittance flows [START_REF] Adenutsi | Macroeconomic Determinants of Workers' Remittances and Compensation of Employees in Sub-Saharan Africa[END_REF][START_REF] Singh | Determinants and Macroeconomic Impact of Remittances in Sub-Saharan Africa[END_REF][START_REF] Freund | Remittances: Transaction Costs. Determinants. and Informality[END_REF]. The exchange rate has a positive impact on remittances. An increase in the deposit rate will motivate the migrants to send more remittances to accumulate financial assets. Thus, we tried to model remittances denominated in local currency as a function of the exchange rate (xr t ), the deposit rate (r mt ), the level of financial development (proxied by the ratio of domestic credit to GDP and the stock of international migrants which is represented as the percentage (%) of the total population) ( M IGRAN T

P OP

).

T R r pt = f   xr t (+)
; r mt (+)

; M IGRAN T P OP

(+)    (EQ.B.5)
The total social benefits received from the government are supposed to be exogenous.

SBE t = γ sbe Y t (EQ.65)
The disposable income of the household sector is given by:

Y D h t = Y P h t -F T h t -ICT t -T R p rt -SOC h t + SBE t + T R r pt (EQ.66)
In our model, due to data availability, we suppose that there are no distributed dividends from the firm's profits earned in the previous period to the households who hold the firm's equities. However, we considered the capital gain on equities in the revaluation matrix. As a result, this capital gain will affect the net wealth of the household sector and, in turn, affects the consumption and investment of households.

Following [START_REF] Keynes | The General Theory of Employment, Interest and Money[END_REF] and [START_REF] Kalecki | Selected essays on the dynamics of the capitalist economy[END_REF], household consumption is partially induced and includes two components: consumption out of wages and consumption out of profits.

Thus, in our model, we propose one consumption which consists of three parts. The first term corresponds to the autonomous component. The two others represent induced elements that depend on the real current disposable income and the real accumulated wealth of households over the past. Econometrically, we estimate the long-run coefficients and short-run coefficients separately. We expect that households' consumption depends positively on their disposable income and net wealth of the past period in the long run. In the short run, the consumption growth rate also depends positively on the change in disposable income. However, we don't find the positive effect of the change in household wealth on the consumption growth rate.

c t = f     Y D h t-1 p C t-1 (+) ; N W h t-1 p C t-1 (+)     (EQ.B.6)
The nominal consumption is given by:

C t = c t * p Ct (EQ.67)
Households' saving represents the disposable income which is not used for consumption. [START_REF] Crockett | Consumer Investment Behavior[END_REF] found that income is the most crucial determinant of a household's investment behaviour. In the report on household investment and accumulation surveys, the Centre for Agricultural Policy Consulting of the Institute of Policy and Strategy for Agriculture and Rural Development (CAP-IPSARD) pointed out that income and non-financial and financial wealth accumulation impacted the household investment decision. Thus, our household investment is modelled as a function of their disposable income, net wealth, and real interest rate, representing the cost of borrowing. We expect that the higher disposable income or net wealth will increase the household's investment. Following an increase in the real lending rate, households will reduce their investment.

S h t = Y D h t -C t (EQ.68)
∆k h k h t-1 = f     Y D h t-1 p C t-1 (+) ; r lt (-) ; F h t-1 K h t-2 (+)     (EQ.B.7)
The nominal household's investment is given by:

I h t = i h t * p Kt (EQ.69)
In our model, the stock of non-financial assets should evolve according to the perpetual inventory method. It means that the stock of the current period is defined by cumulating flows of the previous period and adjusting for capital depreciation.

k h t = (1 -δ h Kt )k h t-1 + i h t (EQ.70)
If the household's investment is larger (less) than its savings, it represents a financing need (capacity) which is one of the factors driving the household's financial asset allocation. The net financing capacity of households is defined by the following: Households allocate their wealth between the different assets. Following Godley and Lavoie (2007b), dong deposits take on a buffering role of households account. Households can hold cash, dong deposits, foreign deposits, government bonds, and equities as assets. [START_REF] Keynes | The General Theory of Employment, Interest and Money[END_REF] argues that households hold cash for three distinguished motives: "(i) the transactions-motive, i.e. the need of cash for the current transaction of personal and business exchanges; (ii) the precautionary-motive, i.e. the desire for security as to the future cash equivalent of a certain proportion of total resources; and (iii) the speculative-motive, i.e. the object of securing profit from knowing better than the market what the future will bring forth".

N F C h t = Y D h t -C t -I h t (EQ.71)
Thus, in our model, Vietnamese households use mainly cash for transactions related to their consumption and deposit rate. The demand for cash H t is given by :

∆ln(H t ) = f (C t (+) ; r mt (+) ) (EQ.B.8)
We suppose that households desire to purchase an exogenous fraction (γ h B ) of the supplied government bonds.

B h t = γ h B B t (EQ.72)
The changes in foreign deposits of households depend on the different foreign flows received by the households, which include the compensation of employees from abroad, the remittances net the transfers from households to the rest of the world. Thus, the changes in foreign deposits of households denominated in local currency are given by:

∆F M h t = γ h F M * (W B r t + T R r pt -T R p rt ) (EQ.73)
We assume that households absorb the supply of equity from firms and banks in excess of demand by the rest of the world:

E h t = E f t + E b t -E r t (EQ.74)
The change in other financial assets is supposed to be exogenous. As mentioned above, the dong deposits are defined as the buffer stock of the household sector.

∆DM h t = ∆L h t -∆H t -p E t ∆E h t -∆OT A h t -N F C h t (EQ.75)
The household's loans demand is a function of the lending rate, which represents the cost of borrowing. Suppose that households borrow from commercial banks to finance their financing need to invest; the household debt also depends on the household's capital accumulation.

L hD t = f     r l t-1 (-) ; ∆k h t-1 k h t-2 (+)    
(EQ.B.9)

Commercial banks impose credit rationing on households. The level of credit rationing depends on the debt-to-income (DTI) ratio, which is calculated as the ratio of the interest payments and the new debt to the primary income. In our model, we suppose that banks will not provide loans to households if the DTI is higher than 0.4, which means 40% of primary income.

DT I h t = min 0.4,

IT LH + ∆L hD t Y P h t (EQ.76)
The new loans provided by banks to households are expressed as follows:

∆L h t = DT I h t * Y P h t -IT LH (EQ.77)
The household's net wealth is defined as:

N W h t = p K t k h t + H t + B h t + DM h t + F M h ust xr t + p E t E h t + OT A h t -L h t (EQ.78)

Government and fiscal policy

The government collects taxes, receives other transfers or payments and then consumes and invests. From 2000 to 2019, the state revenue increased by an average of 17% per year. Domestic revenue accounts for the most significant part of state budget revenue which contributes to the stability of government revenue. However, adopting an expansionary countercyclical fiscal policy due to a slowing of economic growth in recent years led to a lower tax and tariff rate, reducing state revenue. The personal income tax is increasing, but their part in total is still moderate due to difficulties in tracking personal earnings of the private sector, while the informal sector remains important. From 2008 to the present, oil revenue decreased due to the lower oil price and stagnant crude oil production. In terms of expenditure, the government's expenditures increased annually by roughly 17% from 2000 to 2019. Current spending, which includes expenses on social and economic activities (education, health, society, welfare...) and administration, remains the most significant part of total public spending. The State budget deficit remains at a high level which causes the rising of public debt and becomes one of the biggest macroeconomic risks facing Viet Nam. There was a considerable increase in public debt in 2008 and 2012. However, since 2016, the government has engaged in improving the budget deficit with a target of under 4% during the period 2016-2020. The public deficit can be financed by issuing bonds or borrowing from abroad.

The public deficit is the difference between the government's revenues and total expenditures in the model.

N F C g t = GOV REVt -GOV EXPt (EQ.79)
The total government revenues are determined by the government value-added from the production, taxes (taxes on production, taxes on imports, VAT, profit taxes, personal income taxes), and property incomes.

GOV REVt = p Y t va g t + SOC t + T OP t + F T t + ICT t + T IM t + IT GM cb t + IT GM b t (EQ.80)
Taxes on production

T OP t = τ T OP * Y t (EQ.81) Social contributions SOC t = SOC f t + SOC b t + SOC g t + SOC h t (EQ.82)
Profit taxes from productive sectors

F T t = F T f t + F T b t + F T h t (EQ.83)
Interest on government deposits

IT GM cb t = r mt GM cb t-1
(EQ.84)

IT GM b t = r mt GM b t-1
(EQ.85)

The total government expenditures are the sum of the government's current spending, public investment and interest payments.

GOV EXPt = GOV CEt + +p K t i g t + IT B cb t + IT B b t + IT B h t + r f lt F L g t-1
(EQ.86)

The government's current spending consists of government wages (λ g W B t ), labor contributions (α g W B g t ), taxes on production (τ g p p Q t q g t ), transfers to abroad (γ RG Y t ), social benefits for households (SBE t ) and public consumption (p G t g t ). Current transfers from abroad to the government

GOV CEt = W B g t + SOC g t + τ g p p Q t q g t + γ RG Y t + SBE t + p G
T R r gt = γ RG * Y t (EQ.92)
We suppose that the public expenditures (g t ) and public investment (i g t ) are exogenous. The public expenditures and public capital increase at an exogenous growth rate.

g t = g t-1 * (1 + γ G )
(EQ.93)

k g t = k g t-1 * (1 + γ IG ) (EQ.94)
The public investment is given by:

i g t = k g t -(1 -δ g Kt )k g t-1
(EQ.95)

We suppose that the government's deposits are exogenous and that banks are projected as an exogenous variable represented as a part of nominal GDP.

GM b t = γ b GM * Y t (EQ.96)
The changes in government deposits are:

∆GM b t = GM b t -GM b t-1 (EQ.97)
The changes in government deposits in the central bank are exogenous. The stock of government deposits in the central bank is the accumulation of government deposits over the past.

GM cb t = GM cb t-1 + ∆GM cb t (EQ.98)
Thus, the total of the government's deposits is given by:

GM t = GM cb t + GM b t (EQ.99)
The stock of foreign deposits denominated in local currency held by the government depends on their foreign loans.

F M g t = γ g F M * F L g t (EQ.100)
As with other sectors in our model, the change in other financial assets is supposed to be exogenous.

The government's net borrowing/lending position determines the change in public debt. Given the financing need of the government, the new public debt is determined by:

∆DEBT Gt = N F C g t -∆OT A g t -∆GM cb t -∆GM b t -∆F M g ust xr t (EQ.101)
The government can borrow from abroad or issue bonds to finance its financing need. As analysed in Chapter 3, the slight decrease in the external debt relative to the domestic debt reflects the prudential policy of the Vietnamese government in order to avoid any currency risk. Thus, we assume that the stock of foreign loans of the government, as a policy tool, is expressed as an exogenous part of the public debt of the past period.

F L g t = γ g F L * DEBT G t-1 (EQ.102)
The new issued bonds of the government are given by:

∆B t = ∆DEBT Gt -∆F L g t (EQ.103)
The stock of public debt is calculated by:

DEBT Gt = DEBT G t-1 + ∆DEBT Gt + F L g us t-1 * ∆xr t (EQ.104)
The net wealth of commercial banks can be written as:

N W g t = p K t k g t + OT A g t + GM t + F M g ust xr t -B t -F L g ust xr t (EQ.105)

Central Bank and monetary policy

According The central bank provides loans for commercial banks and therefore receives the interest from banks (IT LB cb t ). The central bank's profit can be written as follows. We assume that this profit is fully transferred to the government.

F cb t = IT B cb t + IT LB cb t -IT GM cb t (EQ.106)
International reserves are considered a central bank's tool to manage the exchange rate.

Following the IMF (2019), the SBV daily announces the target exchange rate vis-à-vis the US dollar. The SBV actively intervenes in the foreign exchange market by accumulating/decumulating its international reserves to keep the exchange rate within the predetermined band around the target. Thus, we suppose that the change in international reserves will be a function of the nominal exchange rate and the ratio between the previous level of international reserves and the level of nominal GDP. As the reserves intervention by the SBV should influence the FX rate simultaneously, the reserve-to-GDP ratio is used as an instrumental variable. The effect of this ratio can be interpreted as the SBV will hesitate to intervene in the foreign exchange market when they do not have sufficient international reserves.

∆ln

(RES t ) = f     xr t (+) ; RES t-2 Y t-2 (+)    
(EQ.B.10) The State Bank of Viet Nam determines the reserves requirement for commercial banks as a proportion of their dong and foreign deposit liabilities. In post-Keynesian economics, the bank's reserves are endogenous and demand-led.

M B cb t = γ M B (DM t + F M t + GM b t ) (EQ.107)
The change in banks reserves is defined by the following:

∆M B cb t = M B cb t -M B cb t-1
(EQ.108)

The central bank absorbs the remaining supply of government bonds in excess of demand by banks and households.

B cb t = B t -B b t -B h t (EQ.109)
The change in other financial assets is supposed to be exogenous.

The net wealth of the central bank can be written as:

N W cb t = RES ust xr t + B cb t + LB cb t -H t -M B cb t -GM cb t + OT A cb t (EQ.110)
The system's unwritten identity is the central bank's accounting equilibrium.

N F C b t = -∆RES t + ∆H + ∆M B cb t + ∆GM cb t -∆B cb t -∆LB cb t -∆OT A cb t (UNWRITTEN)

Commercial banks and financial system

The Vietnamese financial system has developed since the 1990s with the transformation of the

F b t = p Y t va b t -W B b t -SOC b t -T P b t (EQ.111)
The wages paid to workers of banks are defined as a share of the total wage bill.

W B b t = λ b W B t (EQ.112)
Social contributions of banks

SOC b t = α soc * γ wb soc W B b t (EQ.113)
Banks have to pay interest on dong deposits for firms and households.

IT DM t = IT DM f t + IT DM h t (EQ.114)
Interest on refinancing (advances) of the central bank

IT LB cb t = r cb lt LB cb t-1 (EQ.115)
Banks can borrow from abroad, and the interest payments are as follows:

IT F L b t = r f lt F L b t-1 (EQ.116)
Interest on loans paid by households and firms to banks

IT L t = IT L f t + IT L h t (EQ.117)
The primary income of banks is given by the bank's profit (value-added (p Y t va g t ) less wages paid (W B b t ), labour contribution (SOC b t ) less interest paid plus interest received from other sectors.

Y P b t = F b t -IT GM b t -IT DM t + IT B b t -IT LB cb t -IT F L b t + IT L t (EQ.118)
Taxes on the profits of banks are calculated as follows

F T b t = τ b Y P b t-1 (EQ.119)
Bank's disposable income results from their primary income after paying profit taxes.

Y D b t = Y P b t -F T b t (EQ.120)
Bank's saving is also their disposable income and represents the bank's financing capacity On the asset side, commercial banks' assets accumulate the reserves requirement, which is determined by the central bank (EQ.107). Commercial banks decide to hold a part of the remaining government bonds in excess of the household's demand. Thus, it is given by:

S b t = Y D b t = N F C b t (EQ.121)
B b t = γ bb * (B t -B h t ) (EQ.122)
We assume that the commercial bank may finance the demand for loans in the domestic economy by borrowing from abroad. Banks' level of foreign debt is thus a function of the difference between the lending rate and the interest on foreign loans and the level of domestic credit demand. The wider the spread between interest rates on loans and foreign debt, representing a higher profit, the more banks are motivated to increase their foreign debt.

F L b t = f (r l t-1 -r f l t-1 (+) , L t (+) ) (EQ.B.11)
Commercial banks finance their financing needs by issuing equities. Thus, the stock of banks' equity is given by:

E b t = γ EB * L t (EQ.123)
The change in other financial assets is supposed to be residual.

∆OT

A b t = -(∆OT A f t + ∆OT A c b t + ∆OT A g t + ∆OT A h t + ∆OT A r t ) (EQ.124)
The central bank plays the role of a lender of last resort via refinancing for commercial banks.

In other words, commercial banks obtain refinancing from the central bank to cover all the remaining financing needs of commercial banks.

∆LB cb t = -(N F C b t -∆M B cb t + ∆GM b t + ∆DM t -∆B b t -∆L t + ∆F L b t + p E t ∆E b t -∆OT A b t ) (EQ.125)
The net wealth of commercial banks can be written as:

N W b t = M B cb t + B b t + Lt + OT A b t -GM b t -DM t -LB cb t -F L b ust xr t -p E t E b t (EQ.126)

Rest of the world and external dependence

The In our model, the rest of the world accounts in the uses-resources tables consist of three components: the goods and services account, allocation of primary income account, and redistribution of the income account. They correspond to the three accounts of the balance of payments: the goods and services account, primary income account and secondary income account of the balance of payments.

The volume of exports is assumed to be determined by the total volume of imports of main commercial partners of Viet Nam, FDI, and the country's competitiveness (proxied by the ratio of domestic price to foreign price, which is represented as the world GDP deflator).

As analysed in Chapter 1, FDI plays a vital role in Vietnamese exports. This specification reflects the dependence of Viet Nam on the rest of the world not only in terms of the real side but also on the financial side.

x t = f     im P T N t (+)
;

F DI t-2 (+) + p X p * X (+)    
(EQ.B.12)

The volume of imports is defined by domestic demand, FDI and the ratio between the import price and the domestic price ( p IM p Y ). In the long run, the domestic demand has a positive impact on imports (EQ.B.13.1). However, the fall of domestic prices relative to import prices will reduce Vietnamese imports. The growth rate of imports is strongly determined by changes in domestic demand (EQ.B.13.2). There is no price effect on the growth rate of imports.

im t = f     DM D t-1 (+) ; p IM t-1 p Y t-1 (+)    
(EQ.B.13) Domestic demand is the sum of intermediate consumption and final consumption.

DM D t = ic im t + c t + i f t + i g t + i h t + g t (EQ.127)
Trade balance is calculated as:

T B t = x t -im t (EQ.128)
The primary income account records compensation of employees paid by the rest of the world (W B r t ) and net property income from abroad, which include interests on foreign loans (IT F L t ), dividends (DIV ). The interests in foreign loans are the sum of the interest paid by firms, banks and the government.

IT F L t = IT F L f t + IT F L b t + IT F L g t (EQ.129)
The secondary income account registers all transfers of both private and public sectors with the rest of the world (T R r gt , T R p rt , T R r pt ). Current transfers T R r gt , T R p rt are supposed to be dependent on GDP.

T R p rt = γ P R * Y t (EQ.130)
The net financing capacity of the rest of the world, which corresponds to the current account balance in the balance of payments, is the sum of the three balance items above (trade balance, primary income, and secondary income).

N F C r t = p IMt im t -p Xt x t -W B r t + IT F L t + DIV t + T R r pt -T R p rt -T R g rt (EQ.131)
Moreover, the rest of the world's net financing capacity (need) should equal the net domestic financing capacity (need). In other words, the model has to verify this equation.

N F C r t = -(N F C f t + N F C b t + N F C g t + N F C h t )
Rest of the world Given that the portfolio investment is exogenous, the change in other financial assets held by the rest of the world closes the rest of the world's account. Thus, it can be written as:

∆OT A r t = N F C r t + ∆RES t + ∆F M t -∆F DI t -∆F L t -p E t ∆E r t (EQ.132)
The net wealth of the rest of the world denominated in local currency can be written as:

N W r t = F L ust xr t + p E t E r ust xr t + F DI ust xr t + OT A r t -RES ust xr t -F M ust xr t (EQ.133)

Price determination

The GDP deflator is a function of the wage rate and the price of imports. In other words, the inflation incorporates the cost-push determinants such as the wage rate and the price of imports, representing the cost of imported goods used for intermediate consumptions for production. The import price deflator is also used as a proxy for foreign price inflation [START_REF] Bhattacharya | Inflation dynamics and monetary policy transmission in Vietnam and emerging Asia[END_REF]. The level of capacity utilisation is given by the ratio between the real GDP and the potential GDP ( y t-1 y *

t-1

). A capacity utilisation lower than 1 means that the actual GDP is less than the potential GDP. The level of the capacity utilisation is considered to be important for determining inflationary pressures in the economy. Lower capacity utilisation can lead to lower inflation.

p Yt = f     w t-1 (+) ; p IM t-1 (+) ; y t-1 y * t-1 (+)     (EQ.B.14)
The price of exports is determined by the domestic price, which proxies cost pressures, and the world price of imports as Viet Nam is a price taker.

p Xt = f (p Y t-1 (+) ; p * X t-1 (+) ) (EQ.B.15)
Like the price of exports, the price of imports depends on the world price of imports and the exchange rate.

p IMt = f (xr t-1 (+) ; p * IM t-1 (+) ) (EQ.B.16)
For simplicity, we suppose that the price index of output, consumption, fixed capital, public expenditures, and inventories are a function of the GDP deflator.

The price of government expenditure is defined by:

p Gt = f (p Y t-1 (+) ) (EQ.B.17)
The price of capital is determined as follows:

p Kt = f (p Y t-1 (+) ) (EQ.B.18)
The price of inventories is defined as:

p IN Vt = f (p Y t-1 (+) ) (EQ.B.19)
The price of output is estimated as follows:

p Qt = f (p Y t-1 (+) ) (EQ.B.20)
The price of consumption is determined by the nominal and real consumption:

p Ct = Y t -G t -I t -I 12t -X t + IM t y t -g t -i t -i 12t -x t + im t (EQ.134)

Asset prices

The refinancing rate or the interest rate of refinancing from the central bank to commercial banks is considered one of the monetary policy tools. Indeed, the State Bank of Viet Nam determined the objectives and the major measures on monetary policy management as follows:

"manage the monetary policy proactively and flexibly in close association with the fiscal policy to control inflation, stabilise macro-economy, support economic growth at a reasonable level, and ensure the liquidity of credit institutions. Flexibly manage the reasonable interest and exchange rates in accordance with macro-economic and monetary developments, especially inflation; and ensure the value of Viet Nam dong, continue to restrict the dollarisation and goldarisation". Therefore, the refinancing rate is a function of inflation and the exchange rate. Moreover, the interest rate of the United States impacts the interest rate of developing countries. When the Fed raises interest rates, investors tend to sell assets denominated in foreign currencies and buy dollar-denominated assets. The wider the spread between U.S.

interest rates and interest rates in other countries, the more investors are likely to move from foreign-denominated to dollar-denominated assets. This increased demand for dollars raises the dollar exchange rate, and other countries' currency exchange rates tend to weaken. It raises the prices of imports to those countries, pushing up inflation. A falling exchange rate can also make it difficult for companies and governments to service dollar-denominated debt.

The central bank may decide to support their currency exchange rates by raising interest rates to solve this problem.

r cb lt = f ( π t (+) ; xr t-1 (+) ; r us l t-1 -r cb lt (+) ) (EQ.B.21)
The refinancing rate is also a monetary policy mechanism via commercial banks. In other words, this interest rate is the base rate of interest which impacts different interest rates in the financial system (Godley and Lavoie, 2007b). The banks determine the lending rate based on it. Then, the lending rate will affect the investment of sectors and then impact the global demand of the economy.

r lt = f (r cb lt (+) ) (EQ.B.22)
Then, the deposit rate depends on the lending rate.

r mt = f (r lt (+) ) (EQ.B.23)
In our model, we suppose that the interest rate on foreign deposits (r f m ) is 0%. This is one of the essential tools for SBV to manage monetary policy to concretise the anti-dollarization target of the Government and help stabilise the exchange rate and the foreign currency market. [START_REF] Le | Exchange rate determination in Vietnam[END_REF] shows that three theoretical approaches can explain the exchange rate. One of the approaches to defining the exchange rate is the Balance of Payment. The nominal exchange rate is determined mainly by the disequilibrium of foreign exchange demand and supply.

When the demand is higher than the supply, the nominal exchange rate will increase and vice versa. The second approach is the monetary and portfolio approach which assumes that economic agents will choose the assets having a higher expected return from a portfolio of domestic and foreign assets. This difference in expected return can be expressed as the difference between the domestic and foreign interest rates.

xr t = f     D F X t-1 -S F X t-1 S F X t-1 (+) ; r us l t-1 -r cb lt (+)     (EQ.B.24)
The foreign exchange demand is given by:

D F X t = im t * p IMt + IT F L t + DIV t + T R p rt + ∆F M t -∆RES t (EQ.135)
The foreign exchange supply is given by:

S F X t = x t * p Xt + W B r t + T R r gt + T R r pt + ∆F L t + ∆E r t * p Et + ∆F DI t + ∆OT A r t (EQ.136)
The price of equity is defined as a function of the US price of equity, the lending rate, which represents the borrowing cost of firms and the exchange rate. The interest rate on foreign loans is assumed to be determined by the US interest rate.

r f lt = f (r U S l t-1 (+) ) (EQ.B.26)
The rate of return of bonds is a function of the refinancing rate and the public deficit in % of GDP (Peiris, 2013).

r bt = f     r cb lt (+) ; f ( N F C g t-1 Y t-1 (+)     (EQ.B.27)
The price of FDI is determined by the price of domestic equity. The exchange rate implicitly impacts the price of FDI via the price of domestic equity.

p F DIt = f (p E t-1 (+) ; xr t (+)
) (EQ.B.28)

Estimations

Estimation strategy

This section presents our estimation strategy in behavioural equations of the model. All behavioural equations are linear regressions. We mainly use Vector Error Correction Models (VECMs), which lead to the corresponding Error Correction Mechanisms (ECMs) for each specification, or OLS regression. VECM estimates give a long-run interpretation, whereas ECM estimates give a short-run interpretation. The short-and the long-run are linked via speeds of adjustment (the coefficients of the corresponding cointegration vectors lagged one period (vc -1 ). This estimation method consists of three main steps. First, we test our variables for a unit root using the augmented Dickey-Fuller (ADF) and test where our variables are cointegrated. The second step is the OLS estimation of the long-run. The residual of this regression has to be stationary. It can be verified by using the ADF test. Then, we estimate the short-run relationship by using the OLS method and integrating the lagged residual of the long-run estimation. Its coefficient has to be negative. Regarding the equations with OLS regression, we did standard tests on the residual using the Jarque-Bera test for normality test, the Breusch-Pagan test for heteroskedasticity test, and the Ljung-box test for autocorrelation test.

The specifications of variables can be different in logarithms based on other criteria. First, the explanatory variables have to be chosen with respect to the theoretical meaningfulness (economic theory). Second, it should also base on statistical validity. However, in some cases, we still keep the variables with the right signs of the estimated coefficients, even if the latter is not significant. It attempts to find a balance between empirics and theory [START_REF] Byrialsen | An Empirical Stock-Flow Consistent Macroeconomic Model for Denmark[END_REF]. Third, the specification has to satisfy the system-wide implications. In some cases, the econometric specification gives the best fit with the serie, but the integration into the equation system is not satisfied. We have precisely the same problem highlighted in [START_REF] Zezza | Stock-Flow Consistent Macroeconomic Models: Theory, Practice and Applications[END_REF]. We had to go back and forth in estimating relations and checking the implications with simulation exercises. It allows us to modify and reshape each equation in order to have more meaningful and realistic results. Our objective is not only to have a best fit with past data but also to have reasonable projected results.

While estimating these behavioural equations, in order to fit the simulated values (fitted values) to the actual data, we have to deal with the outliers. According to [START_REF] Hendry | Econometric Modelling of Time Series with Outlying Observations[END_REF], outliers can come from the sudden behavioural shifts or data measurement errors. The sudden behavioural shifts can come from major events in the economy. During the period 1996-2019, the Vietnamese economy experienced several structural events (Figure 1. We present the equations in different groups of variables. Thus, it is not in the same order in which they appear in the model described above. All estimated parameter and their t-statistics are shown for each equation.

• Demand components: Investment, Consumption, Exports, Imports

• Financial assets and liabilities of each sector

• Prices

• Interest rates, rates of return, price of financial assets

• Labour market

Demand components

Firm's investment (EQ.B.1) The firm's investment decision is represented as the net physical accumulation rate, i.e. the ratio of the net flow of non-financial assets to the stock of the past period. The firm's investment mainly depends positively on the past accumulation rate and the profit rate. The cost of borrowing from commercial banks has a negative impact on capital accumulation. The investment of firms is also driven by an accelerator effect of the capacity utilisation proxied by the ratio of actual GDP and potential GDP. Firms should increase their investment when the capacity utilisation is high. When demand is strong, firms will increase production by increasing their investment. The estimation result found a negative effect of an increase in equity price representing the financial profitability of the real investment. Indeed, the literature on financialisation demonstrated the crowding-out effect of financialisation on real investment (Hein and van Treeck (2010), [START_REF] Hein | The Macroeconomics of Finance-Dominated Capitalism -and its Crisis[END_REF]). The growing importance of financial revenues and profits vis-à-vis the revenues and earnings from real investments will induce firms to invest in financial assets and reduce their investment in non-financial assets. Firms will sacrifice long-term investment to increase short-term profits. It is called "managerial myopia" (Samuel 2000) or "rent-seeking behaviour", which focuses mainly on short-term profitability.

∆k f k f t-1 = ζ 0 + ζ 1 (+) * ∆k f t-1 k f t-2 + ζ 2 (+) * y t-1 y * t-1 + ζ 3 (-) * (r lt -π t ) + ζ 4 (+) * F f t-1 K f t-2 + ζ 5 (-) * ∆p E t p E t-1 (EQ.B.1)
Consumption (EQ.B.6) In the long-run, household consumption depends positively on their disposable income and net wealth of the past period. The marginal propensity to consume is around 0.66, and the elasticity of consumption to financial wealth is 0.17. In the short-run, the growth rate of consumption depends mainly on the change in disposable income. Following a 1% increase in the growth rate of disposable income, the percentage change of consumption increases by 1.13%. The effect of the change in a household's wealth on the growth rate of consumption becomes negative but not significant.

ln(c t ) = δ c 0 + δ c 1 (+) * ln Y D h t-1 p C t-1 + δ c 2 (+) * ln N W h t-1 p C t-1 (EQ.B.6.1)
∆ln(c t ) = δ 1 (+) * ∆ln N W h t-1 p C t-1 + δ 2 (+) * ∆ln Y D h t-1 p C t-1 + δ 3 (-) * vc -1 (EQ.B.6.2) vc -1 = ln(c t-1 ) -δ c 0 -δ c 1 * ln Y D h t-2 p C t-2 -δ c 2 * ln N W h t-2 p C t-2
Household's investment (EQ.B.7)

∆k h k h t-1 = ζ h 0 (+) * ∆k h t-1 k h t-2 + ζ h 1 (+) * ∆ln Y D h t-1 p C t-1 + ζ h 2 (-) * r lt + ζ h 3 (+) * F h t-1 K h t-2
(EQ.B.7) 4.11 shows the estimated coefficients of the impact of households' disposable income and the cost of borrowing on their decision on investment. A 1% rise in disposable income leads to around 0.1% increase in their investment. The real lending rate, which represents the cost of borrowing, has a negative effect on their investment. A 1% rise in the lending rate provokes a fall in the demand for household's investment by 0.01%. In reality, households' investment in housing is important. An increase in house prices motivates households to invest more in constructing new houses [START_REF] Byrialsen | An Empirical Stock-Flow Consistent Macroeconomic Model for Denmark[END_REF]. However, we do not have the data for investment in housing as well as the housing price.

Exports (EQ.B.12)

∆ln(x t ) = θ x 0 + θ x 1 (+) * ∆ln(x t-1 ) + θ x 2 (+) * ∆ln(im P T N t ) + θ x 3 (+) * ∆ln(F DI t-2 ) + θ x 4 (+) * ∆ln p X p * X + θ x 5 (+) * ∆ln(xr t-1 )
(EQ.B.12) 4.12 shows that the change in the growth rate of exports depends firstly positively on the foreign demand even though the effect is relatively low. A 1% increase in the growth rate of foreign demand implies a 0.044% rise in the growth rate of exports, respectively. An increase in the exchange rate represents a depreciation of the domestic currency, which leads to an improvement in competitiveness. A 1% rise in the exchange rate provokes an 0.29% increase in the growth rate of exports. The negative sign of the coefficient of the relative price illustrates that a 1% increase in Vietnamese export price above the world export price will diminish the demand for exports by 0.34%. Finally, one of the specific characteristics of the Vietnamese economy is the contribution of the FDI sector to exports. It translates to a positive impact of the changes in FDI on the growth rate of the volume of real exports. The volume of imports is a function of domestic demand and the ratio of the domestic price level with respect to the price of imports. A 1% rise in domestic demand leads to a 1.2% increase in real imports. The role of domestic demand in determining the level of imports is clearly important. The fall of domestic prices relative to import prices will reduce Vietnamese imports. In addition, the majority of Viet Nam's total imports were implemented by the FDI sector, especially for machinery and equipment. It confirms the positive result of the coefficient of the FDI as in percentage of GDP. However, the coefficient is not significant in the long-run. We found only a significant effect in the short-run.

Imports (EQ.B.13) ln(im t ) = ι im 0 + ι im 1 (+) * ln(DM D t-1 ) + ι im 2 (+) * ln p IM t-1 p Y t-1 + ι im 3 (+) * ln F DI t-1 Y t-1 (EQ.B.13.1)
∆ln The short-run equation of imports shows an autoregressive persistence. The estimated speed of adjustment of -0.124 implies that the short-run evolution (the ECM estimation) approaches its long-term evolution at a rate of 12.4% annually.

(im t ) = ι 0 + ι 1 (+) * ∆ln(im t-1 ) + ι 2 (-) * vc -1 (EQ.B.13.2) vc -1 = ln(im t-1 ) -ι im 0 -ι im 1 * ln(DM D t-2 ) -ι im 2 * ln p IM t-2 p Y t-2 -ι im 3 * ln F DI t-2 Y t-2

Financial assets

Firm's debt (EQ.B.3) The specification for the firms' indebtedness is shown in EQ.B.3. The negative effect of the interest rate on the debt demand of firms is confirmed where the coefficient τ lf 3 is negative. Since the high indebtedness implies higher interest expenses, it affects the creditworthiness of firms. Thus, it makes firms' credit demand decrease. An increase in the debt ratio of firms represents a reduction in debt demand. Firms have different options to finance their financing need, for example borrowing from commercial banks. Consequently, it is supposed that if it becomes more expensive to borrow from banks (i.e. the lending rate increases), it leads firms to contract more foreign debt.

∆ln(L f D t ) = τ lf 0 + τ lf 1 (-) * L f t-1 N W f t-1 + τ lf 2 (+) * ∆ln(L f t-1 ) + τ lf 3 (-) * ∆ln(r lt ) (EQ.B.3)

Firm's foreign debt

(EQ.B.2) ∆ln(F L f t ) = τ f lf 1 (+) r lt -r us lt - ∆xr t xr t-1 + τ f lf 2 (+) r l t-1 -r us l t-1 - ∆xr t-1 xr t-2 + τ f lf 3 (+) * ∆y t-1 y t-2 (EQ.B.2)
∆ln(F L f ) τ f lf 1 -0.021 * * (0.009) τ f lf 2 0.025 * * (0.009) τ f lf 3 0.
It is considered a substitution of financing instruments. Moreover, a "good news" scenario, represented by an increase in economic growth rate, pushes output up. This positively affects the investment and, thus, the demand for foreign debt to finance it. From the point of view of foreign investors, the high economic growth will attract foreign capital. It translates into the positive coefficient of the variable "economic growth" (τ f lf 3 ) in the EQ.B.2.

Firm's equities (EQ.B.4) 4.17 indicates that the changes in the volume of equity issued by firms are determined positively by the interest rate, which represents an alternative financing instrument for firms and the volume of investment which reflects the financing need of firms. From the demand side, they seek the cheapest option for financing. It must be noticed that it is in contrast to the effect of the changes in equity in the previous period.

∆E f t = τ ef 0 + τ ef 1 (-) * ∆E f t-1 + τ ef 2 (+) * i f t + τ ef 3 (+) * r l t-1 (EQ.B.4)
Bank's foreign debt (EQ.B.11) As expected, the estimation results (Table 4.18) show that commercial banks will increase their stock of foreign debt when the demand for credit in the domestic economy rises. However, their decision depends also on the difference between the cost of borrowing from abroad and the profit from lending domestically. The higher the difference, the higher the demand for foreign debt is. The coefficient υ 2 , which is positive and significant, validates our hypothesis.

ln(F L b t ) = υ 0 + υ 1 (+) * ln(F L b t-1 ) + υ 2 (+) * (r l t-1 -r f l t-1 ) + υ 3 (+) * ln(L t ) (EQ.B.11)
Household's debt (EQ.77)

∆ln(L hD t ) = χ 0 + χ 1 * ∆ln(L h t-1 ) + χ 2 * ∆ln(r l t-1 ) + χ 3 * ∆k h t-1 k h t-2
(EQ.77) There is a negative long-term association between the interest rate and household debt demand, representing a negative coefficient. This implies that a 1% increase in the lending rate decreases household credit demand by 0.3%. On the other hand, a 1% increase in the physical capital accumulation of the households sector leads to an increase in debt by 0.6%.

Household's cash (EQ.B.8) Cash held by households is estimated as a dependent variable of their nominal consumption.

ln(H t ) = δ h 0 + δ h 1 (+) * ln(C t ) + δ c 2 (-) * ln(r mt ) (EQ.B.8.1)
Households hold more cash when they increase their consumption. However, they also seek the financial return from the deposits in commercial banks. Thus, the deposit rate will negatively affect the stock of cash of households. It is reflected in the positive and negative significant coefficient of consumption and deposit rate, respectively, in the long-run equation (Table 4.20).

∆ln The short-run equation confirms the findings from the long-run specification. The speed of adjustment is, as expected, negative and significant.

(H t ) = ̺ 0 (+) * ∆ln(H t-1 ) + ̺ 1 (+) * ∆ln(C t-1 ) + ̺ 2 (-) * ∆ln(r m t-1 ) + ̺ 3 (-) * vc -1 (EQ.B.8.2) vc -1 = ln(H t-1 ) -δ h 0 -δ h 1 * ln(C t-1 ) -δ h 2 * ln(r m t-1 )
International reserves (EQ.B.10) As mentioned above, the central bank responds to the exchange rate variation by intervening in the stock of international reserves. The results (Table 4.22) indicate that the growth in international reserves will decline by around 3.2% in response to depreciation by one percentage point. In addition, it falls by 2.9% in response to a one percentage point increase in the reserve to GDP ratio. The latter implies that when the stock of reserves is enough, the central bank does not hesitate to intervene. They will decumulate international reserves following a depreciation. The estimation results confirm our hypothesis. Migrants will send remittances to the origin country when the exchange rate and the deposit rate increase. The higher the number of workers, the greater the remittances. We obtain all three coefficients as positive and significant. The GDP deflator is estimated as a logarithmic function and depends on the wage rate and the price of imports in the long-run. The results can be interpreted in percentage terms. It implies that a 1% increase in wage rate and import price leads to 0.51% and 0.52% in the GDP deflator, respectively.

∆ln(RES t ) = γ 0 + γ 1 (-) * ∆ln(RES t-1 ) + γ 2 (-) * ∆ln(xr t ) + γ 3 (-) * RES t-2 Y t-2 (EQ.B.10)

Remittances

Prices

∆ln(p Yt ) = ξ 1 (+) * ∆ln(p Y t-1 ) + ξ 2 (+) * ∆ln(p IMt ) + ξ 3 (+) * ∆ln(w t-1 ) + ξ 4 (-) * vc -1 + ξ 5 (+) * y t-1 y * t-1
(EQ.B.14.2) The short-run specification is shown in Table 4.25. It indicates that the growth rate of the GDP deflator (inflation rate) is positively affected by its previous period. Following a 1% increase in the growth rate of the general price level in this period will cause a 0.18% rise in a period later. Wage rate and import price positively affect the price. A 1% rise in the growth rate of wage rate provokes a 0.44% increase in inflation in the same year. An increase of 1% in the import price leads to an increase in prices of 0.18%. We also found a positive impact on capacity utilisation, which represents a demand effect. Finally, the annual speed of adjustment is about 20%.

vc -1 = ln(p Y t-1 ) -ξ py 0 -ξ py 1 * ln(w t-2 ) -ξ py 2 * ln(p IM t-1 )
Price of exports (EQ.B.15) The price of exports is estimated as a function of the domestic and world export prices. We found that a 1% increase in domestic price and the world price of exports in the previous period lead to a change of 0.64% and 0.27% in the export price of the present period. We note that the coefficient associated with the domestic price, which represents the cost-push effect, is higher than that of the world price. Following the same convention of interpretation as the price of exports, the log of the price of imports is a function of the exchange rate and the world price of imports in logarithms.

ln(p Xt ) = µ px 1 (+) * ln(p Y t-1 ) + µ px 3 (+) * ln(p * X t-1 ) (EQ.B.15.1)
∆p Xt = µ 0 (+) * ∆ln(p X t-1 ) + µ 1 (-) * vc -1 (EQ.B.15.2) vc -1 = ln(p X t-1 ) -µ px 1 * ln(p Y t-2 ) -µ px 2 * ln(p * X t-2 )
The coefficient of the exchange rate has a right sign but is not significant. The import price elasticity with respect to the world import price is 1.81, which is very high. It can be explained by the fact that Viet Nam is a small open economy, and the country is a price taker on the import side. The estimation results of the short-run equation (Table 4.29) show that the growth rate of import price is determined by itself lagged one period, that of world import price of the same period and lagged one period. The coefficient representing the speed of adjustment is negative and significant, around 14.5% per year.

∆ln(p IMt ) = ν 1 + ν 2 (+) * ∆ln(p IM t-1 )+ ν 3 (+) * ∆ln(p * IMt )+ ν 4 (+) * ∆ln(p * IM t-1 )+ ν 5 (-) * vc -1 (EQ.B.16.2) vc -1 = ln(p IM t-1 -ν pim 1 * ln(xr t-2 ) -ν pim 2 * ln(p * IM t-2 )
As mentioned above, for simplicity, the price of public expenditures, price of capital, price of inventories and price of output are defined as a function of the GDP deflator in both the long-run and the short-run. The long-run specification consists of each price level in a logarithmic function of the GDP deflator. The short-run is represented by the growth rate of the long-run specification with an annual speed of adjustment. All prices are demonstrated to move with the GDP deflator. Given that the interpretations are in the same convention, we will not interpret for each corresponding interpretation but only show the estimated results below.

Price of public expenditures (EQ.B.17)

ln(p Gt ) = σ pg 0 (+) + σ pg 1 (+) * ln(p Yt )
(EQ.B.17.1)

) = σ g 1 (+) * ∆ln(p G t-1 ) + σ g 2 (+) * ∆ln(p Y t-1 ) + σ g 3 (-) * vc -1
(EQ.B.17.2) (EQ.B.20.2)

vc -1 = ln(p G t-1 ) -σ pg 0 -σ pg 1 * ln(p Y t-2 )
) = σ k 1 (+) * ∆ln(p K t-1 ) + σ k 2 (+) * ∆ln(p Y t-1 ) + σ k 3 (-) * vc -1 (EQ.B.18.2) vc -1 = ln(p K t-1 ) -σ pk 0 -σ pk 1 * ln(p Y t-2 )
) = τ 0 + τ 1 (+) * ∆ln(p IN V t-1 ) + τ 2 (-) * vc -1 (EQ.B.19.2) vc -1 = ln(p IN V t-1 ) -τ pinv 0 -τ pinv 1 * ln(p Y t-2 )
vc -1 = ln(p Q t-1 ) -τ pq 0 -τ pq 1 * ln(p Y t-2 )

Interest rates, Rates of return and asset prices

Refinancing rate (EQ.B.21) The long-run specification of the refinancing rate equation is a function that links the refinancing rate of the central bank to the inflation rate. Clearly, following a rise in inflation, the central bank will raise the refinancing rate. Note: * p<0.1; * * p<0.05; * * * p<0.01

ln(r cb lt ) = β l 0 + β l 1 (+) * π t (EQ.B.21.1)
∆ln(r cb lt ) = β 0 (+) * ∆ln(xr t ) + β 1 (+) * (r us lt -r cb l t-1 ) + β 2 (-) * vc -1 + β 3 (+) * ∆ln(r cb l t-1 ) (EQ.B.21.2) vc -1 = ln(r cb l t-1 ) -β l 0 -β l 1 * π t-1
In the long-run, the lending rate depends positively on the refinancing rate of the SBV. A 1% increase in the refinancing rate will lead to an increase of 0.8% in the lending rate of commercial banks. It will affect the investment decision of sectors in the economy.

∆ln(r lt ) = ̟ 0 (+) * ∆ln(r l t-1 ) + ̟ 1 (+) * ∆ln(r cb lt ) + ̟ 2 (-) * vc -1 (EQ.B.22.2)

vc -1 = ln(r l t-1 ) -̟ rl 0 -̟ rl 1 * ln(r cb l t-1 )
(+) * (r U S l t-1 -r cb l t-1 ) + α 3 (+) * D F X t-1 -S F X t-1 S F X t-1
(EQ.B.24) In the case of the price of FDI, it is estimated as a function of the equity price and the exchange rate. The results confirm that the price of FDI positively relates to the price of equity and the exchange rate in the previous period. However, the effect of the exchange rate is much lower than the price of domestic equity. (EQ.B.30.2) The active population is assumed to follow a simple autoregressive process and positively depends on the total population.

vc -1 = ln(r f l t-1 ) -κ rf l 0 -κ rf l 1 * ln(r U S l t-2 )

Labour market

vc -1 = ln(w t-1 ) -ϑ 0 -ϑ 1 * ln(p C t-2 ) -ϑ 2 * ln(U t-2 ) -ϑ 3 * ln y t-1 N BW t-1
vc -1 = ln(N BW f t-1 ) -λ 0 -λ 1 * ln(va f t-1 ) -λ 2 * ln(pop ACT IV t-1 )

Validation

Fitting with past data

This section will show how the model can fit with the past data. Indeed, after integrating all estimated equations in the model, we simulate the model and compare it with the actual data. We show the figures for comparing simulated and actual data of some main variables.

In each graph, the red line represents the value simulated from the model, and the blue line

shows the actual series we are using.

Baseline scenario

When we perform the scenario analysis in order to examine the effects of any shock on the economy, we should define the baseline scenario by projecting/extrapolating our exogenous variables and parameters during the period of projection. Broadly speaking, we classify into two sets of exogenous variables. A group of variables represents the socioeconomic development trends of Viet Nam. Some relevant variables are such as population growth, the unemployment rate, the capital depreciation. The second set of variables represents the dynamics of the world. It includes variables such as the world GDP, the demand for imports of main partners, and the US interest rate. The estimated parameters are assumed to be constant in the model simulation. Depending on the analysis, we will describe in detail the baseline scenario.

In practice, there are several ways to project exogenous variables/parameters [START_REF] Reyes | Economic Policy and IncomeDistributionThe case of France since the early 1970s[END_REF][START_REF] Zezza | Stock-Flow Consistent Macroeconomic Models: Theory, Practice and Applications[END_REF][START_REF] Byrialsen | An Empirical Stock-Flow Consistent Macroeconomic Model for Denmark[END_REF]. In our study, given the size of the model, some simplifying assumptions are made as follows. As mentioned above, all estimated parameters are supposed to be constant. Some variables very small or close to 0 will be projected as 0.

Regarding the financial side of the model, we choose how to project them depending on their recent behaviour. We can take the value at the mean of the last years or use the latest value.

Choosing some exogenous variables/parameters is also challenging when the combination affects the simulated results.

Conclusion

This chapter presented an empirical stock-flow consistent model which provides a theoryconsistent representation of the general structure of the Viet Nam economy and offers policy/scenario simulation capabilities to the needs of policymakers. The first section gave the detailed model structure with equations that make up the model. We presented a number of justifications for the model's chosen structure.

To summarise briefly, the model comprises six institutional sectors with their behaviours that integrate both the real and financial side of the economy. The financial assets included in the model are chosen based on the data availability and relevance to the Vietnamese economy.

Notable features of the model, which will be important in the policy/scenario simulations that look at different transmission mechanisms to the economy (Chapter 5, 6), include:

• The production is determined by demand but faces production capacity constraints.

• Firms have to decide how much to invest and how to finance it from domestic and external financing sources.

• Households essentially deal with consumption, investment and portfolio choices, i.e.

accumulation of financial assets.

• The public deficit is assumed to be financed by issuing bonds or borrowing from abroad.

• The central bank conducts monetary policies using different tools such as the refinancing rate, the international reserves or the bank's reserves requirements.

• Commercial banks provide credits but impose credit rationing on firms and households.

• Viet Nam has a high degree of openness. Exports and imports depend on several external factors, such as world demand, world prices as well as FDI.

• Price is supposed to be a cost-push function and is affected by the aggregate demand.

• Employment is determined by supply (active population) and demand side (economic activities).

Our model has several structural parameters estimated using annual data from 1996 to 2019 with Vector Error Correction Models (VECMs), which lead to the corresponding Error Correction Mechanisms (ECMs) for each specification, or OLS regression. These estimations also considered the sudden behavioural shifts of the economy by adding the event-specific dummy variables. We had to go back and forth in estimating relations and checking the implications with simulation exercises in order to choose the reasonable specifications.

The simulation results show the model's overall performance in replicating the system's dynamics by comparing it with the historical data. In addition, it is crucial to be transparent that the main objective of our simulations is to analyse the effects of different shocks on the economy rather than provide a forecast of the economic growth rate. Thus, the simulation results will be used as the baseline scenario against different scenarios in order to analyse the effects of such shocks on the economy. The following two chapters will make use of the model to simulate the effects of different economic policies or shocks on the Vietnamese economy.

Our model makes a contribution to Viet Nam's macroeconomic modelling literature and offers a useful macroeconomic analysis tool for policymakers.

Fiscal shock

We introduce a standard fiscal stimulus. Expansionary fiscal policy, i.e. an increase in government spending, is expected to boost economic activity. We implement a one-shot increase in real government expenditures of 38 Trillion dong in 2020, which corresponds approximatively to 1% real GDP.

The increase in public spending is expected to have the usual stimulus effects, an increase in the volume of GDP, a limited inflationist shift, and an imbalance in the trade balance. On the financial side, it will affect each sector's financial balance and balance sheet. Especially the fiscal shock impacts public finance and increases public debt.

Figure 5.2 shows the effects of fiscal expansion on GDP and their demand components.

Increasing public consumption contributes directly to GDP. The increase in GDP can lead to the improvement in productivity and wages. Thus, consumption and investments rise one period later, while net exports turn negative following the increase in households' disposable income. Indeed, the rise in demand implies an increase in imports and worsens the trade balance. Economic growth attracts foreign capital, which translates to an exchange rate appreciation. Thus, it could raise the trade deficit (Figure 5.3) and reduce GDP.

In addition, GDP can decrease after fiscal expansion because the profits slow down the first year after the shock when the wage bill gets most of the increase in GDP. The decrease in the profit rate negatively affects a firm's investment, a component of GDP. Then, the economy enters a new cycle resulting from the system's dynamics.

Focusing on the financial balances, Figure 5.14 shows the results of this interest rate shock.

The commercial bank sector has experienced a decrease in financing capacity in the short run due to the increased interest on deposit payments. Then, the debts become more expensive and increase the interest payments. The financial balance of banks will improve. The financial balance of firms increases in the short run because of the reduction in their investment. The substitution of foreign financing ways for domestic ones leads to an increase in the financial balance of the rest of the world in the short run. The household sector has improved its financial balance following the increase in received interest and decreased investment. The decrease in economic activity implies a slight fall in government tax revenues and vice versa.

The rise in interest rate also provokes an increase in the rate of return of government bonds.

Then, it leads to an increase in government deficit and the stock of public debt.

Turning to the financial side of the model, Figure 5.15 shows the impacts on the balance sheet of each sector. For the firm sector, following the rise in investment, firms will demand more loans from banks and FDI and issue more equities. Only a small amount of foreign loans is getting from firms. For the households sector, they have more debt, but they also hold more cash. They also allocate their financing capacity among different assets. The banking sector mostly satisfies the demand for loans from other sectors in the economy. The government issued more bonds instead of increasing foreign loans to finance the public deficit. Finally, the ROW matches the demand for liabilities coming from the domestic economy. In general, the literature identifies three main transmission channels through which capital inflows impact the economy, but it still has conflicting effects on domestic demand [START_REF] Godin | Modelling Small Open Developing Economies in a Financialized World: A Stock-Flow Consistent Prototype Growth Model[END_REF]. The overall impacts depend on the relative strengths of these channels and policy responses.

Foreign shock

• Trade channel: Capital inflows provoke excess supply in foreign exchange, leading to an appreciation of the domestic currency. It will reduce exports and increase imports because exported goods become expensive and imported goods become cheaper. Thus, the trade balance is in deficit. However, the central bank can intervene to prevent appreciation by increasing domestic bank reserves, reducing financing costs for the domestic banking system, and pulling down the lending rate. It will induce firms to borrow to invest, thus positively affecting aggregate demand.

• Balance sheet Channel: capital inflows are strongly associated with asset price booms.

The rise in asset price will increase the sector's wealth, and then the latter positively affects the consumption of households and investment in the economy. Capital inflows can impact the exchange rate, and appreciation leads to a revaluation of liabilities in the balance sheet of each sector. In addition, the appreciation of the currency also leads to an increase in real income for households, fuelling consumption and increasing aggregate demand.

• Liquidity Channel and Credit Booms: Foreign capital inflows can lead to an increase in According to the information released by the Government about the report on the results of the implementation of the state budget in 2020 and the estimated state budget in 2021, which had been sent to the National Assembly, to offset overspending mainly due to the COVID-19 pandemic, in 2020, the Government had actively operated the issuance of government bonds.

Around VND 333,000 billion in government bonds were issued to cover overspending and repay principal. In 2020, the Government extended the maturity of government bonds by more than 3.5 times that in 2011. From 3.9 years (in 2011) to an average of 13.94 years (in 2020), they increased the average debt maturity of the government bond portfolio at the end of 2020 to 8.42 years. Moreover, the government also mobilised medium and long-term capital.

It did not borrow more from international financial institutions such as the World Bank and Asian Development Bank, contributing to strengthening the country's credit rating.

Regarding monetary policies, the SBV had decided to reduce the operating interest rate, which allowed liquidity support for credit institutions and reduced the cost of borrowing capital for businesses and households.

Another monetary policy to support enterprises affected by the COVID-19 is related to the debt term restructuring and loan interest exemption (Circular No. 01/2020/TT-NHNN on 13th

March 2020). This policy contributed to controlling bad debts during this period. In addition, the SBV had the credit support policy for the banking sector to balance their capital sources, save operating costs to restructure debt, exempt or reduce loan interests and payment fees and consider new lending for production and business of enterprises and households; regularly monitor and evaluate the situation of borrowers to promptly and effectively implement support measures; stabilising deposit and lending interest rates; promptly responding to people's payment needs. Credit support package of commercial banks, worth 250,000 trillion VND, according to which banks were committed to implementing credit support packages with per-year interest rates lower than 2% than before COVID-19. The support package from the Social Policy Bank was worth 16,000 trillion VND to extend the debt for customers, adjusted repayment terms and issued new loans.

Post-Covid recovery plan

Recently, in January 2022, Viet Nam's National Assembly approved the Resolution 43, which was the post-Covid recovery plan for the Vietnamese economy and focused on six pillars to revive the economy post-pandemic: (1) circulation of goods and smooth production of enterprises;

(2) promoting manufacturing to restore economic growth;

(3) large-scale investment (inter-regional transport infrastructure, green energy, and national digital infrastructure);

(4) address difficulties confronting businesses; (5) institutional reforms; (6) human resources.

This recovery plan set several policies to support the country in achieving a GDP growth of took the form of loans at 2 per cent a year through commercial banks for various industries to support business households and cooperatives. Especially more than 30% of the recovery by the government to bring the Vietnamese economy back to its pre-COVID level had raised the concern of public debt management, one of the macroeconomic fundamentals. Hence, it justifies our study examining the effects of the government's responses to coping with COVID-19 on the economy, public debt, and fiscal sustainability. In other words, the pandemic was going to have a substantial impact on public finances.

The notion of public debt sustainability refers to the fact that public debt cannot continue to increase relative to national income. When public debt increases over several periods, the government must increase future primary surpluses in order to repay the debt or face default [START_REF] Oviedo | Public Debt, Fiscal Solvency & Macroeconomic Uncertainty in Emerging Markets: The Tale of the Tormented Insurer[END_REF]. This means that the government has to increase their revenues (mainly taxes) and/or reduce its spending. This is linked to the government's fiscal policies.

However, the government can also rely on monetary policies implemented by the central bank.

The central bank increases the money supply, which leads to higher inflation and then the real value of public debt declines. However, suppose that the stock of public debt is too large. In that case, it will have a negative impact on the financial markets due to the loss of confidence/expectations in the government's financial capacity.

Moreover, public debt tends to increase very rapidly after each crisis. Several international organisations have decided to increase the loans and provide more financial resources for developing countries to avoid sovereign debt defaults. However, [START_REF] Arquié | Covid-19: Has the Time Come for Mainstream Macroeconomics to Rehabilitate Money Printing?[END_REF] insisted that the Domestic Resources Mobilization (DRM) is an underused instrument to build recovery from the pandemic and the road to sustainable development, especially in low-and middle-income countries. For developing countries, due to the difficulties of mobilising domestic resources for social and investment, it is inevitable to rely on foreign aid or other external financing resources. However, to avoid inconsistency with the country's development goals/priorities, DRM is a critical 'anchor' for country-led development strategies and contributes to reducing the country's fiscal vulnerability [START_REF] Napo | Assessing public debt sustainability under COVID-19 uncertainty: Evidence from Côte d'Ivoire[END_REF]. In terms of modelling implications, we integrate an increase in the government's final consumption, an increase in public investment, an increase in transfers from the government to households, and the reduction of the central bank's interest rate during the period 2020-2023.

The values of these shocks are based on the actual value of fiscal stimulus and the government's recovery plan to replicate the reality as possible.

We will examine the effects of these public interventions against the COVID-19 pandemic.

Following the same analysis framework of the previous section, we will discuss the impact on main macroeconomic indicators, including GDP, prices, current account and fiscal account.

We expect that the government's responses will impact not only the real side but also the financial side, which is the public debt.

Firstly, an increase in public consumption and public investment can contribute directly to the GDP but with a slight delay due to the adaptive expectations in the production decision (Figure 5.39). Secondly, the fiscal expansion will increase the transfers to households which stimulate their disposable incomes, resulting in a relative increase in their consumption and investment. Thirdly, reducing the central bank's interest rate will reduce the lending rate (Figure 5.41) and the cost of borrowing for firms and households. After the public intervention during 2020-2023, the real GDP turns to the baseline scenario and declines during the next period, which can mainly be explained by the negative impact on the country's trade balance (Figure 5.40). By 2025, the economy can enter into a new cycle.

The overall increase in aggregate demand, however, has a negative impact on the current account. Imports increase due to the higher domestic demand (Figure 5.40). On the contrary, exports decrease because the inflation resulting from the stimulus package implies a reduction in the country's competitiveness (Figure 5.42).

Looking at the government's account, the red line represents the results of the fiscal expansion scenario compared to the baseline scenario (the blue line). The increase in public spending, public investment, and household transfers will increase the government's total expenditures.

In the meantime, reducing tax revenues will cut back the government's revenue. Overall, it negatively affects the public deficit compared to the baseline scenario. This deterioration of the fiscal balance (Figure 5.43) increases the public debt in the medium-term as the the possible short-term adverse effects of the pandemic on the private sector. Viet Nam aims to accelerate the disbursement of public investment, which can contribute to stimulating private investment, thereby amplifying the impact of the stimulus and recovery package. For the household sector, local authorities ensure the fastest disbursement of support packages for pandemic-hit workers. The delayed disbursement will affect the effect of the stimulus and recovery package on economic growth.

The banking system plays a critical role in financing businesses and household investments to contribute to economic recovery. Indeed, the monetary policy of the recovery plan will ease the lending conditions for financial institutions, debt repayment delays for households and firms, and credit guarantee schemes. These policies aimed to reduce the pandemic's adverse economic outcomes in the short run. However, they also revealed several potential economic fragilities and financial risks for the economic recovery. Thus, it could have an adverse impact on economic growth and worsen the government revenue, the public deficit and the public debt.

The fact that the government mobilises the domestic debt rather than external debt helps to avoid the country's debt burden. The COVID-19 crisis amplified and exposed several pre-existing structural weaknesses of the economy and society. The Vietnamese recovery after COVID-19 also faces several long-term structural challenges, such as climate change, population ageing, the acceleration of digitalisation, and rising inequalities. A sustainable post-COVID recovery could be achieved when the government has to ensure that the investments undertaken today will be consistent with the development priorities of Vietnam. This requires the government to take a policy mix to promote resilient and inclusive economic growth, compensate the costs of public debts due to COVID-19-induced budget deficits, and support the sustainability of public finances.

Not only being able to adopt with an interest in policy, the SFCVN model can also be used Section 6.3 explains in detail our integrated framework built to assess the economic impacts of climate change. Section 6.4 and 6.5 discuss the integration and the potential effects of adaptation measures on the economy. Section 6.6 concludes with some more policy-oriented recommendations and avenues for further research.

6.2 Climate change and climate policy in Viet Nam2

Climate change in Viet Nam

In this subsection, we provide the observed data and projected trends for climate (temperature Regarding the extreme temperatures (Figure 6.2), the average daily maximum (Tx) and minimum (Tn) temperatures increased across the whole country over the period 1981-2018.

High records were set mainly in El Nino years (1987,1997,2010,2017). The general incremental levels were from 0.11 to 0.32°C/decade in almost all regions. However, the Tx increased relatively faster in the North Delta, southern Northeast, northern North Central, and eastern Southern Viet Nam. Tx increased relatively more slowly in the South Central and western Central Highlands. Tn recorded its greatest increase in the Central Highlands (0.5°C/decade), followed by 0.45°C/decade in the Northwest, 0.29°C/ decade in the South, and 0.24-0.26°C/ decade in the remaining regions. and pushing the future development of renewable energy, green finance and the carbon market.

Finance and technology will be decisive in the coming years, with international support in bilateral and multilateral collaborations crucial if Viet Nam is to reach its ambitious but essential objective.

An integrated framework to assess climate impacts

Existing coming from the financial side -have had significant impacts in real terms as well. They have thus revealed the critical need to pay more attention to the integration of the financial sector (i.e. money, debt, and assets/liabilities) and the real economy within a single framework to gain a proper understanding of the dynamics at hand. This more coherent approach is key for any comprehensive macroeconomic analysis. It is necessary for public policies, a sound development process and macroeconomic stability in the longer term.

Our methodological approach in this paper builds on the integrated assessment approach of [START_REF] Hsiang | Estimating economic damage from climate change in the United States[END_REF], who have attempted to assess the economic cost of climate change in the US via a combination of multiple climate scenarios, quantitative meta-analysis of sectoral and social impacts based on existing studies, and integration within a macroeconomic model. indexed against the change in average temperature in the corresponding climate realisation across the four RCPs. As such, the relative weighting of each sector follows the weighting anticipated by the Vietnamese government up to 2050 and is defined in the baseline scenario.

By being expressed as a percentage change, this direct damage would scale with the economy's expansion while holding the economy's structure unchanged compared to the baseline.

Agriculture

Since the entire Vietnamese population depends on agriculture for food, and agricultural labour still accounts for a significant proportion of total labour (33% in 2020), agriculture remains one of the most important sectors. Climate change impacts the agricultural sector via direct (temperature, precipitation, sea level rise, etc.) and indirect mechanisms (water resource, saline intrusion, drought, floods, impacts on labour productivity, etc.). Despite the expected restructuring of agriculture from predominantly rice production towards higher-value products -such as coffee, rubber, fishing, etc., rice is still one of the most important crops in Viet Nam. In addition, Viet Nam is one of the largest rice exporters (top 5 rice exporting countries in 2020). In our study, agricultural yield impacts are represented as changes in rice yields. We base our analysis purely on a meta-analysis of a set of key existing studies We assume that climate damage affects labour productivity through the number of workers (EQ.DMG.7). There is a positive impact from both the demand and supply side on the number of workers. The higher level of economic activity, the higher demand for workers.

The number of employed individuals depends on the size of the active population considered as the labour supply. The priority sectors for adaptation include agriculture, transport, infrastructure and urbanisation, natural resources, industry and trade, public health, and tourism. These sectors are also the most affected by climate change. Financial help for implementation shall be mobilised through different channels, including the state budget (central and local budgets), international funding, the private sector, and community contributions. One of the key components of adaptation policies is investing in infrastructure resilience. Still, it is also the costliest (GCA 2018a), which leads to a crucial question of the source of financing. IMF (2021) distinguish three types of adaptation investment: (i) upgrading new projects to foster the resilience of capital stock against climate hazards over time, (ii) retrofitting existing assets which aims to modify existing capital stock exposed to natural hazards to improve resilience, and (iii) developing coastal protection infrastructure such as dikes and storm surge barriers [START_REF] Rozenberg | Beyond the Gap: How Countries Can Afford the Infrastructure They Need while Protecting the Planet[END_REF]. Both public and private sectors can implement these adaptation investments, and it will raise their financing needs. However, it is also known that the different types of infrastructure have different socio-economic impacts.

Integrating adaptation investment

Analysing the effects of adaptation with model-based simulations is still new in the literature.

We To sum up, the economy-wide effects of adaptation investments depend mainly on the extent of the investments (their protection level) and how they are financed. Following [START_REF] Lecocq | How might climate change affect economic growth in developing countries ? a review of the growth literature with a climate lens[END_REF]Shalizi (2007), De Bruin, Dellink, and[START_REF] De Bruin | AD-DICE: an implementation of adaptation in the DICE model[END_REF], [START_REF] Bosello | Climate Policy and the Optimal Balance between Mitigation, Adaptation and Unavoided Damage[END_REF], [START_REF] Millner | Adaptation to climate change and economic growth in developing countries[END_REF], and World Bank (2021), adaptation is produced via an adaptation capital stock. This adaptation capital stock is the accumulation of adaptation investment and depreciates at the same rate as productive capital.

According to the Intergovernmental Panel on Climate Change (IPCC), adaptation seeks to moderate or avoid harm or exploit beneficial opportunities in human systems. Different entities may have appropriate adaptation strategies to deal with climate change. However, the national adaptation policies also define essential principles that need to be applied, such as: using an integrated and systems-based approach; taking into account uncertainties; applying proactive strategies; addressing vulnerability and risk; mainstream adaptation into development planning and policies; actively mobilise and engage all relevant stakeholders; to promote multi-benefit actions, soft measures, and ecosystem-based and community-based adaptation measures; and to develop and implement a monitoring and evaluation system for climate change adaptation. These principles indicate the high quality of adaptation policies, which aim to promote integrated, holistic, and inclusive approaches and account for the interrelationships between sectors and regions, short-term and long-term actions, and climate change uncertainties. Therefore, in our model, we consider both private and public adaptation investments. We suppose that each sector will decide its adaptation level considering the expected damage.

Suppose that firms and households anticipate the direct damage to their activity sector, and the government will anticipate the damage to the whole economy. Given that productive investment is forgone to pay for adaptation investment, the productive capital stock and, therefore, the potential supply of the economy will suffer. These effects are important drivers of the results in our model simulations. Thus, the level of adaptation investment of firms will depend on the opportunity cost of the money spent on the productive investments represented by the profit reduction related to this amount of investment and the effectiveness of different levels of protection. The reduction of profit related to the adaptation investment amount will be proportional to the profit generated by the productive investment. However, given that the investment decision in adaptation can impact the productive investment of firms, firms have to dedicate a part of their total investment to adaptation, and the residual will go to productive investment. The same convention is applied to households. The public adaptation investments could make the economy more resilient to climate events and the damaging effects (lower productivity) of higher temperatures (World Bank, 2021). The government will decide the level of adaptation investment only by considering their effectiveness in reducing the damages from climate change.

The effectiveness of adaptation is represented via a protection function [START_REF] De Bruin | AD-DICE: an implementation of adaptation in the DICE model[END_REF][START_REF] De Bruin | AD-DICE: an implementation of adaptation in the DICE model[END_REF][START_REF] De Cian | Alleviating inequality in climate policy costs: an integrated perspective on mitigation, damage and adaptation[END_REF]) which determines the residual damages and depends on the stock of adaptation capital and the temperature changes. Firstly, we assume a declining marginal increase in protection in line with the literature [START_REF] De Bruin | AD-DICE: an implementation of adaptation in the DICE model[END_REF]Tol, 2009, World Bank, 2021). Secondly, the more global warming is, the less adaptation space we have. Therefore, the protection function is a negative function of global warming (increase in temperature). Assuming that the protection function is homogenous for all sectoral damages, the residual damage is equal to the product of gross damage and the level of protection.

Even if the adaptation is not considered a productive capital, the adaptation investment will still be considered in calculating GDP, firms and government expenses. Consequently, the economy-wide effects of adaptation investments depend strongly on how each sector finances its adaptation investments. It will affect their debt structure and, thus, imply important macro-financial impacts on the economy.

Regarding modelling implications, we suppose that adaptation investment (i A ) is implemented by different institutional sectors in the economy, including government, firms and households.

i A = i A f + i A h + i A g
(EQ.AD.1) Thus, the accumulated stock of adaptation capital with the depreciation rate of each capital's sector (public and private) is given by:

k A f = (1 -δ f K t-1 ) * k A f t-1 + i A f (EQ.AD.2) k A h = (1 -δ h K t-1 ) * k A h t-1 + i A h (EQ.AD.3) k A g = (1 -δ g K t-1 ) * k A g t-1 + i A g (EQ.AD.4)
The total adaptation capital is:

k A = k A f + k A h + k A g (EQ.AD.5)
This adaptation investment has to be taken into account within the accounting framework.

The GDP is calculated as follows:

y t =

Adaptation decision

Each sector decides its adaptation level, considering the expected gross damage. Suppose that firms and households anticipate the direct damage to their activity sector, and the government will anticipate the damage to the whole economy.

The level of adaptation investment of firms (i A f ) will depend on the opportunity cost of the money spent on the productive investments represented by the profit reduction related to this amount of investment and the effectiveness of adaptation investment represented by the expected residual damages.

i A f = α 1 * (1 -p) * GD e f + (1 -α 1 ) * ( k A f t-1 k t-1 * F f t-1
k t-2 ) (EQ.AD.10)

where α 1 represents the preference parameter (0 < α 1 < 1). If α 1 = 1, firms will invest in reducing all anticipated damage. The profit reduction related to the adaptation investment amount will be proportional to the profit generated by the productive investment.

where p denotes the protection function.

However, suppose that the investment decision in adaptation can impact the productive investment of firms. It means that firms have to dedicate a part of their total investment to adaptation, and the residual will go to productive investment. Total desired investment is defined by the following:

i e f = f(profit rate, interest rate, capacity utilisation rate, financial profitability)

Realised productive investment is given by: AD.11) main difference between Option 1 and Option 2 is that the proportion of renewable energy in 2050 in Option 1 (73%) is higher than in Option 2 (48.5%), in which the proportion of electricity Fixed solar energy in Option 1 is about 4-5 times higher than that of Option 2.

i f = i e f -i A f (EQ.
Option 2 has a higher proportion of fossil energy than Option 1, so prevention and landfilling measures must be applied. -Option 3 is Option 2 but with partially replaced electricity, applied for the period after 2035 when the level of safety and cost is appropriate.

Climate change impacts are simulated by adding the damage functions, and adaptation The model was run with four damage functions on agriculture, energy, labour productivity and mortality rate and against four climate scenarios (SSP1-2.6, SSP2-4.5, SSP3-7.0 and SSP5-8.5). Considering the uncertainty from the different climate scenarios (but not from

Conclusion

Our results provide a new economy-wide assessment of the social and economic effects of climate change on the Vietnamese economy as a whole, using an integrated macroeconomic framework based on empirical analyses of climate impacts and available regional and global climate models. Summing across sectoral direct impacts as a function of VNMST change 2020-2099 relative to the pre-industrial period 1851-1900, we found that the expected annual GDP loss is 1.8% relative to the baseline scenario at +1°C of warming. This loss becomes 4.5% for a 1.5°C increase, 6.7% for a 2°C increase and up to 10.8% for a 3°C increase. The cross-sectoral and macroeconomic effects of these sectoral impacts by 2050 will lead to average losses, which are larger than direct damages by around 30%.

This national estimate is built using the first empirical stock-flow coherent macroeconomic model of the Vietnamese economy. In that sense, growth is demand-driven, while production capacities are affected by the direct impacts of temperature increases on agriculture, energy, labour productivity and health (mortality and infectious diseases) and by the indirect impacts of sea level rise and typhoons on capital stock and agriculture. This estimate will certainly not be the last, as multiple known sectors of the Vietnamese economy for which no suitable studies exist have been omitted from the analysis so far. We could mention the impacts of climate change on tourism, forestry management, aquaculture and fisheries, the informal sector, and biodiversity losses, to name a few. We will complete the work in some of those directions over the remaining duration of the project. However, more generally, the GEMMES Viet Nam architecture is designed to be open to contributions from rigorous future studies, which would quantify climate impacts in these "missing sectors". Our approach, therefore, allows for updates based on new econometric/sectoral modelling results or climate model projections.

Even if not all effects have been accounted for, the loss could possibly reach up to about These provide a basic framework for planning, designing and implementing climate adaptation.

The macroeconomic simulation results in this chapter suggest some policy recommendations for more effective adaptation:

Promoting a resilient adaptation and net-zero transition

Being aware of the urgency of climate change responses, the Vietnamese authorities started to, as soon as 2008, draw action plans and policies for climate change response with a strong focus on adaptation [START_REF] Pannier | The Three Dialectics of Adaptation Finance in Vietnam[END_REF]. To implement these adaptation policies, the Vietnamese government has allocated its own budget and received significant financial support from international organisations, especially bilateral and multilateral partners. At the local level, communities have made many efforts to mobilise resources for dealing with sudden climate-related hazards. This adaptation progress by the government could be assessed by some conceptual framework, including "leadership, organisation, and policy" [START_REF] Ford | A systematic review of observed climate change adaptation in developed nations: A letter[END_REF]; "adaptive capacity" focusing on the strength and existence of governance structures and policy processes that determine whether adaptation takes place [START_REF] Ford | A framework for examining adaptation readiness[END_REF].

Adaptation investment and effectiveness

The effectiveness of adaptation investment has been concerned by the national strategy, especially the national plan for adaptation to climate change for the period 2021-2030, with a vision for 2050. Various international institutions have evaluated the financing mechanism and resources mobilised for adaptation in countries. "Climate finance readiness", proposed by the United Nations Development Program (UNDP), was defined as "the capacities of countries to plan, access, deliver, monitor, and report on climate finance, both international and domestic, in ways that are catalytic and fully integrated with national development priorities and the achievement of the Millennium Development Goals". To support developing countries in strengthening their capacities in climate finance, the German Agency for International Cooperation (GIZ) has developed a "Ready for Climate Finance" approach which emphasises the involvement of the private sector.

Financing and prospective macro-financial scenarios

The simplified simulation of adaptation investment suggests a reduction in GDP losses compared to the situation without adaptation. The higher efficiency of adaptation, the larger benefit from adaptation would be for both the public and private sectors. However, the more global warming, the less adaptation space we have. Climate action will be taken in the context of uncertainties, and using comprehensive analytical work as our provided framework can help to carefully examine the potential impacts and results.

described in Chapter 2. The lack of data compiled for the different institutional sectors challenged the development of our SFCVN model and imposed us to make some simplifying assumptions.

Our

A Perpentual Inventory Methods, Revaluation matrix

In our model, the value of non-financial assets should evolve according to the perpetual inventory method. It means that the current period's worth is defined by cumulating flows to the previous period's value and adjusting for the depreciation of capital and the variation of capital prices.

p K t k t = p K t-1 k t-1 + p K t i t + ∆p K t * k t-1 (171)

Figure 1 .

 1 Figure 1.1 GDP growth rate, % . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  Figure 1.1 GDP growth rate, % . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1

 1 Figure 1.2 GDP growth rate of six ASEAN countries, % . . . . . . . . . . . . . . .

Figure 1 . 3

 13 Figure 1.3 Population vs Labor force growth, % . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.4 Unemployment, % total labor force . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.5 Inflation, % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 . 6

 16 Figure 1.6 Current account balance, % GDP . . . . . . . . . . . . . . . . . . . . .

Figure 1 . 7

 17 Figure 1.7 Current account, % GDP . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.8 Openess, % GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 . 9

 19 Figure 1.9 Export and import growth, % . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.10 Trade balance, %GDP . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.11 By country, Million USD . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.12 Exports by good, % total . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.13 Exports by country, % total . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.14 Contribution to GDP, % total . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.15 Contribution to exports, % total . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.16 Imports by good, % total . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.17 Imports by country, % total . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.18 Capital inflows, Billions USD . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.19 Stock of FDI inflows, %GDP . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.20 Part of FDI sector in government revenues, %total . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.21 FDI by country, Billion USD . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.22 FDI by activity, Billion USD . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.23 External debt by maturity, %total . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.24 Long-term external debt, %total . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.25 Remittances, %GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.26 OECD Diamond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xii

Figure 1 .

 1 Figure 1.28 Magic diamond and rectangle of Viet Nam for different periods . . . . .

Figure 1 .

 1 Figure 1.29 State revenues, Billion VND . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.30 State expenditures, Billion VND . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.31 Public deficit, %GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.32 Public debt, %GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.33 Composition public debt, Trillion USD . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.34 Debt by country/donor, Million USD . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.35 Interest rates, % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.36 International Reserves, %GDP . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.37 Domestic financing, % GDP . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.38 Household's debt, %GDP . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.39 Changes in exchange rate, % . . . . . . . . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.40 Nominal -Real Effective Exchange Rate . . . . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.41 Annual growth rates of GDP's components, % . . . . . . . . . . . . . .

Figure 1 .

 1 Figure 1.42 Contribution of demand components to annual GDP growth, % . . . .

Figure 3 . 1

 31 Figure 3.1 Sequence of accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 3 . 2

 32 Figure 3.2 Classification of institutional sectors . . . . . . . . . . . . . . . . . . . .

Figure 3 . 3

 33 Figure 3.3 Financial system structure . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 3 . 4

 34 Figure 3.4 Three financial balances, %GDP . . . . . . . . . . . . . . . . . . . . . .

Figure 3 . 5

 35 Figure 3.5 Private sector balance, %GDP . . . . . . . . . . . . . . . . . . . . . . .

Figure 3 . 6

 36 Figure 3.6 Current account, %GDP . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 3 . 7

 37 Figure 3.7 National wealth, %GDP . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 3 . 8

 38 Figure 3.8 Balance sheet for firms, %GDP . . . . . . . . . . . . . . . . . . . . . .

Figure 3 . 9

 39 Figure 3.9 Balance sheet for the central bank, %GDP . . . . . . . . . . . . . . . .

Figure 3 .

 3 Figure 3.10 Balance sheet for commercial banks, %GDP . . . . . . . . . . . . . . .

Figure 3 .

 3 Figure 3.11 Balance sheet for the government, %GDP . . . . . . . . . . . . . . . .

Figure 3 .

 3 Figure 3.12 Balance sheet for households, %GDP . . . . . . . . . . . . . . . . . . .

Figure 3 .

 3 Figure 3.13 Balance sheet for the rest of the world, %GDP . . . . . . . . . . . . . .

Figure 4 . 1

 41 Figure 4.1 Simplified structure of the model . . . . . . . . . . . . . . . . . . . . .

Figure 4 . 2

 42 Figure 4.2 Fitting with past data -GDP Components . . . . . . . . . . . . . . . .

Figure 4 . 3

 43 Figure 4.3 Fitting with past data -Net sectoral financial balances . . . . . . . . . xiii

Figure 5 . 2

 52 Figure 5.2 Fiscal shock -Impacts on GDP components (Scenario/Baseline * 100) .

Figure 5 . 3

 53 Figure 5.3 Fiscal shock -Impacts on trade . . . . . . . . . . . . . . . . . . . . . .

Figure 5 . 4

 54 Figure 5.4 Fiscal shock -Impacts on prices (Scenario/Baseline * 100) . . . . . . .

Figure 5 . 5

 55 Figure 5.5 Fiscal shock -Impacts on financial balances, %GDP (Scenario -Baseline)200 Figure 5.6 Fiscal shock -Impacts on public finance, %GDP (Scenario -Baseline) .

Figure 5 . 7

 57 Figure 5.7 Fiscal shock -Impacts on balance sheet, %GDP (Scenario -Baseline) .

Figure 5 . 8

 58 Figure 5.8 Monetary policy transmission . . . . . . . . . . . . . . . . . . . . . . .

Figure 5 . 9

 59 Figure 5.9 Viet Nam's monetary policy transmission . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.10 Monetary shock -Impacts on interest rates, % (Scenario -Baseline) . .

Figure 5 .

 5 Figure 5.11 Monetary shock -Impacts on GDP components (Scenario/Baseline * 100)206 Figure 5.12 Monetary shock -Impacts on trade . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.13 Monetary shock -Impacts on prices (Scenario/Baseline * 100) . . . . .

Figure 5 .

 5 Figure 5.14 Monetary shock -Impacts on financial balances, %GDP (Scenario -Baseline) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.15 Monetary shock -Impacts on balance sheet, %GDP (Scenario -Baseline)211 Figure 5.16 Foreign shock -Impacts on interest rates, % (Scenario -Baseline) . . .

Figure 5 .

 5 Figure 5.17 Foreign shock -Impacts on GDP components (Scenario/Baseline * 100) Figure 5.18 Foreign shock -Impacts on trade balance . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.19 Foreign shock -Impacts on prices (Scenario/Baseline * 100) . . . . . .

Figure 5 .

 5 Figure 5.20 Foreign shock -Impacts on financial balances, %GDP (Scenario -Baseline)217 Figure 5.21 Foreign shock -Impacts on balance sheet, %GDP (Scenario -Baseline) Figure 5.22 Revaluation effect on foreign loans (Scenario/Baseline * 100) . . . . . .

Figure 5 .

 5 Figure 5.23 Impacts on foreign loans, %GDP (Scenario -Baseline) . . . . . . . . . .

Figure 5 .

 5 Figure 5.24 Total number of cases of COVID-19 in Viet Nam . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.25 Quarterly GDP growth rate (y-o-y, %) . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.26 Growth rate of economic activities (%) . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.27 Growth rate of GDP components (%) . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.28 Growth rate of investment by economic sectors (%) . . . . . . . . . . .

Figure 5 .

 5 Figure 5.29 Unemployment rate (%) . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.30 Estimated COVID-19 stimulus packages among ASEAN member states (as of 31 May 2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.31 Operating interest rate, % . . . . . . . . . . . . . . . . . . . . . . . . . xiv

Figure 5 .

 5 Figure 5.33 Lending rate, % . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.34 Domestic credit, %GDP . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.35 Market capitalisation, %GDP . . . . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.36 Total recovery package . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.37 Fiscal package . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.38 Structure of public debt, %total . . . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.39 COVID-19 responses shock -Impacts on GDP and components (Scenario/Baseline * 100) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.40 COVID-19 recovery shock -Impacts on trade (Scenario/Baseline * 100) Figure 5.41 COVID-19 recovery shock -Impacts on interest rates, % (Scenario -Baseline) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 5 .

 5 Figure 5.42 COVID-19 recovery shock -Impacts on prices (Scenario/Baseline * 100) Figure 5.43 COVID-19 recovery shock -Impacts on public finance, %GDP (Scenario -Baseline) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 6 . 1

 61 Figure 6.1 Average annual T2m increase in Viet Nam for the period 1981-2018 . .

Figure 6 . 2

 62 Figure 6.2 Average daily maximum (Tx) and minimum temperature (Tn) changes for 1981-2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 6 . 3

 63 Figure 6.3 Annual temperature changes under RCP4.5 and RCP8.5 . . . . . . . .

Figure 6 . 4

 64 Figure 6.4 Annual rainfall changes in Viet Nam for the period 1981-2018 . . . . .

Figure 6 . 5

 65 Figure 6.5 Rx1day and Rx5day changes in Viet Nam for the period 1981-2018 . .

Figure 6 . 6

 66 Figure 6.6 Annual rainfall changes under RCP4.5 and RCP8.5 . . . . . . . . . . .

Figure 6 . 7

 67 Figure 6.7 Changes in sea level during the period 1993-2014 . . . . . . . . . . . .

Figure 6 . 8

 68 Figure 6.8 Number of tropical cyclones in the period 1959-2014 . . . . . . . . . . .

Figure 6 . 9

 69 Figure 6.9 Number of typhoons over level 12 in the East Sea in the period 1990-2015248 Figure 6.10 Number of tropical cyclones at the end of the 21st century (PRECIS model) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 6 .

 6 Figure 6.11 Changes in tropical cyclones of different intensities at the end of the 21st century compared to the baseline scenario (PRECIS model) . . . . . . . .

Figure 6 .

 6 Figure6.12 An integrated framework to assess climate change impacts . . . . . . .

Figure 6 .

 6 Figure 6.13 Rice damage function . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 6 .

 6 Figure 6.14 Hydropower production damage function . . . . . . . . . . . . . . . . . xv

Figure 6 .

 6 Figure 6.16 Labor productivity damage function . . . . . . . . . . . . . . . . . . . .

Figure 6 .

 6 Figure 6.17 Total factor productivity damage function . . . . . . . . . . . . . . . .

Figure 6 .

 6 Figure 6.18 Mortality damage function . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 6 .

 6 Figure 6.19 Estimates of total direct damage under RCPs . . . . . . . . . . . . . .

Figure 6 .

 6 Figure 6.20 Macroeconomic damage (Real GDP loss relative to baseline scenario) .

Figure 6 .

 6 Figure 6.21 Macroeconomic damage when the GWLs 1.5°C and 2°C are reached for RCP8.5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 6 .

 6 Figure 6.22 Distributions of GDP loss in the macroeconomic model compared with direct damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure 6 .

 6 Figure 6.23 Without adaptation -Impacts on Real Gross Domestic Product . . . .

Figure 6 .

 6 Figure 6.24 Without adaptation -Impacts on public debt . . . . . . . . . . . . . .

Figure 6 .

 6 Figure 6.25 With adaptation -Impacts on Real Gross Domestic Product . . . . . .

Figure 6 .

 6 Figure 6.26 With adaptation -Impacts on public debt . . . . . . . . . . . . . . . .

Figure 6 .

 6 Figure 6.27 With adaptation -Impacts on private financing needs . . . . . . . . . .

Figure B. 1

 1 Figure B.1 Firms -Financial assets & liabilities . . . . . . . . . . . . . . . . . . . .

Figure B. 2

 2 Figure B.2 Central Bank -Financial assets & liabilities . . . . . . . . . . . . . . .

Figure B. 3

 3 Figure B.3 Commercial banks -Financial assets & liabilities . . . . . . . . . . . . .

Figure B. 4

 4 Figure B.4 Government -Financial assets & liabilities . . . . . . . . . . . . . . . .

Figure B. 5

 5 Figure B.5 Households -Financial assets & liabilities . . . . . . . . . . . . . . . . .

Figure B. 6

 6 Figure B.6 Rest of the world -Financial assets & liabilities . . . . . . . . . . . . .

Figure B. 7

 7 Figure B.7 Labor market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure B. 8

 8 Figure B.8 Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Figure B. 9

 9 Figure B.9 Interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

  Nam was ranked 99 out of 182 by the Notre Dame Global Adaptation Initiative (ND-GAIN) in 2019 and 13th among 180 countries by the Germanwatch Global Climate Risk Index for 2000-2019. Climate change, therefore, sets out major challenges for this country, and the government is putting climate change and sustainable development at the heart of development policies such as the National climate change strategy and Green Growth Strategy.

Chapter 6 -

 6 Macroeconomic impacts of climate change With a long coastal line and abundant geological and natural diversity, Viet Nam has emerged as one of the most vulnerable countries to climate change in the Asia-Pacific region. Climate change has deeply impacted different economic sectors, including cereal production, fishing, and electricity from hydropower. The Vietnamese economy also is exposed to the transversal impact of climate change on labour and capital, which are production factors. Climate change, therefore, sets out major challenges for the country, and the Vietnamese government is putting climate change, climate adaptation and sustainable development at the heart of its development policy. Thus, assessing climate change impacts and adaptation is crucial for policy planning at the macroeconomic level. This chapter aims to develop an integrated prospective economy-wide assessment to analyse the economic impacts of climate change and adaptation measures in the context of a greener industrialisation process for Viet Nam. It consists of three main steps: apply a monetary valuation to each damage; then, develop damage functions which represent losses in each sector represented as conditional on Viet Nam mean surface temperature (VNMST) change and finally, integrate into the SFCVN model, in order to assess the intersectoral and aggregate effects. In order to examine the economy-wide impacts of adaptation investments, we integrate adaptation which is produced via an adaptation capital stock. Recently, SFC models have been used to investigate ecological macroeconomic issues. The PhD thesis is integrated into the research project GEMMES Viet Nam of the French Development Agency (AFD) and Viet Nam's Ministry of Natural Resources and Environment (MONRE). It is part of the GEMMES project launched by AFD, which aims to develop a new macroeconomic modelling tool. Within its scenarios, it will allow incorporating of financial and monetary risks and their interaction with the impact of global warming. Thus, it is an especially suitable tool for the country's political decision-making. three decades, Viet Nam, a small open economy with significant trade and FDI contributions to economic growth, has emerged as one of Asia's great success stories. At the 6th National Congress of the Communist Party of Viet Nam in December 1986, the government abandoned the central planning model to adopt the socialist-oriented market economy. Since then, Viet Nam has witnessed remarkable economic growth. The country became a lower-middle-income country in 2010. In recent years, integration into the world economy and financialisation have contributed to Vietnamese economic outcomes. However, it has also increased interdependence among countries, increasing Viet Nam's economic vulnerability in the context of rising trade tensions and complexity of financial transactions and weaker macroeconomic resilience to potential external shocks.Comprehensive macroeconomic analysis is crucial for policy-making decisions to contribute to a country's economic growth and macroeconomic stability. Post-Keynesian economics (PKE), one economic thought school of heterodox economics, focus on macroeconomics. Post-Keynesian research has extensively focused on understanding macroeconomic relationships and growth drivers using demand-led macroeconomic regimes. PKE argue that effective demand is the key determinant of economic performance. In the context of globalisation, the Post-Keynesian approach allows analysing the interaction between domestic and external demands of the economy. Finance is also one of the essential features considered in PKE with the analysis of the balance sheet of institutional sectors and financial flows in the economy.Understanding macroeconomic policies is fundamental to understanding the macrodynamics of the economy. The post-Keynesian notion of macroeconomic policy regimes includes monetary policy, fiscal policy, wage policy and foreign economic policy. It allows us to analyse how the country-specific macroeconomic policy regimes supported the shift (or non-shift) of macroeconomic regimes.

  account and the financial account. The current account includes transactions in goods, services, investment income, and current transfers. A current account imbalance can reflect the difference between national savings and investment. A deficit current account represents a lower level of saving than investment; thus, the economy's financing needs to fund domestic consumption and investment. The financial account represents the financial side of the current account. It includes transactions in financial instruments and central bank reserves. Viet Nam experienced a high gap between aggregate investment and gross national savings along the country's regional and global economic integration, especially during the Asian and global financial crises (Figure 1.6). The average difference was around 9.7% between 1996 and 2010 but fell significantly. Before 2005-2006, Viet Nam registered a negative current compared to domestic debt. It contributed to reducing considerably the currency risk related to foreign debt. The government mostly raised external funds to finance development from international organisations such as World Bank and Asian Development Bank and bilateral donors such as Japan (Figure 1.34).Central bank and monetary policyAccording to the Law on the State Bank of Viet Nam in 2010, the SBV is defined as a ministerial agency of the Government -the Central Bank of the Socialist Republic of Viet Nam. The SBV performs (i) the state management of monetary and banking activities and foreign exchange, (ii) the issuance of money, acts as the bank of credit institutions and provides monetary services for the Government and (iii) the state management of public services under the jurisdiction of the State Bank. The objectives of SBV are inflation control, stabilisation of the macro-economy, supporting economic growth and ensuring the liquidity of credit institutions. In order to achieve these objectives, the SBV can use tools, including interest rates tools, exchange rates, reserve requirements, open market operations and other tools. Depending on the macroeconomic conditions, the SBV will use different tools.

Figure 1 .

 1 Figure 1.39 shows the evolution of the nominal bilateral VND/USD rate. A rise corresponds to a depreciation/weakening of the Vietnamese dong (VND). The nominal exchange rate increased in 1997, and it remained stable during the period 2000-2004. It began to climb during the global financial crisis in 2008 and the banking crisis in 2011.

  pursued an export-oriented industrialisation strategy to attract FDI. Between 2002-2011, Viet Nam was classified as a debt-led private demand boom regime with negative financial balances of domestic sectors driven by the corporate and public sectors. The household sector remained slightly positive. The deficit of the domestic sector was reflected by the positive finance balances of the external sector. The private domestic demand mainly leads to demand growth, financed mainly by credit. It corresponds to the period of rapid financial sector development in Viet Nam. In addition, the balance of goods and services negatively contributes to economic growth. After the banking crisis of 2011-2012, Viet Nam can be classified as an export-led mercantilist regime from 2012 to 2019. It is characterised by the positive financial balances of the domestic sector as a whole but with positive financial balances of the private household and banking sectors. In contrast, the firm sector and public sector had a financing need. The external sector recorded a surplus. Domestic demand and the balance of goods and services contribute positively to economic growth.

  [START_REF] Caverzasi | Post-Keynesian stock-flow-consistent modelling: a survey[END_REF] identified three main topics among several contributions of theoretical SFC models: financialisation, open economies and policy.a) FinancialiationIn recent years, financialisation has played an essential role in economic growth. It refers to "the increasing role of financial motives, financial markets, financial actors, and financial institutions in the operation of the domestic and international economies" (Epstein, 2005).

  also develops a Minskyan PK-SFC model. The paper shows that the endogenous destabilising forces described by Minsky only materialise if the central bank tries to control the economy actively using its interest rate. The central bank interest rate should be kept low in order to maintain financial stability.[START_REF] Dafermos | Debt cycles, instability and fiscal rules: a Godley-Minsky synthesis[END_REF] develops a simple macrodynamic model that synthesises some key perspectives of the analytical frameworks of Wynne Godley (financial balances approach) and Hyman Minsky. According to the Minsky mechanism, the private sector's propensity to spend is driven by a stock-flow norm (the target net private debt-to-income ratio). It also includes two fiscal rules: a Maastricht-type fiscal rule (adjust the government expenditures based on a target net government debt ratio) and a Godley-Minsky fiscal rule (link government expenditures with private indebtedness following a counter-cyclical logic). The simulation results show that "(i) the interaction between the propensity to spend and net private indebtedness can generate cycles and instability; (ii) instability is more likely when the propensity to spend responds strongly to deviations from the stock-flow norm and when the expectations that determine the stock-flow norm are highly sensitive to the economic cycle; (iii) the Maastricht-type fiscal rule is destabilising while the Godley-Minsky fiscal rule is stabilising; and (iv) the paradox of debt can apply both to the private sector and to the government sector" (p.1277).b) Open economyIn the context of globalisation, theoretical models with closed economy seem not to be able to address open economies' issues (world imbalances, exchange rates, foreign reserves...).[START_REF] Caverzasi | Post-Keynesian stock-flow-consistent modelling: a survey[END_REF] retained the three phases of open-economy modelling within the SFC framework. Firstly, it is related to Godley's work on world imbalances. The second phase consists of the papers constructing the formal/theoretical representation of open economies within the SFC literature(Godley & Lavoie 2007). Finally, several papers attempt to analyse particular points of the real world. Among these analyses, the European construction and its monetary union received much attention(Lavoie (2003),Godley and Lavoie (2007A),Duwicquet and Mazier (2010),Khalil and Kinsella (2010)).Another strand of theoretical models regarding open economies focuses on exchange rate regimes and foreign reserve variations[START_REF] Caverzasi | Post-Keynesian stock-flow-consistent modelling: a survey[END_REF].[START_REF] Lavoie | A Study of the Diversification of China's Foreign Reserves Within a Three-Country Stock-Flow Consistent Model[END_REF], using a three-country (China, euroland and the USA) model, examine the Chinese reserve diversification with different exchange rate policies: fixed renminbi-dollar parity and a floating euro-dollar exchange rate. The results show that the diversification of Chinese reserves towards euros will be detrimental to euroland in any case but that a gradual diversification will imply a less harmful initial shock even if stabilising a worse situation for Europe. The path dependency represents an interesting feature of the model. Indeed, the exchange rate variation will affect the amount of euros held by the Chinese Central Bank.[START_REF] Mazier | World imbalances and macroeconomic adjustments: A three-country stock-flow consistent model with fixed or flexible prices[END_REF] built a model of three economies with different exchange rate regimes: fixed, managed and floating and allow inflation. They show that having flexible prices might mitigate the results obtained in[START_REF] Lavoie | A Study of the Diversification of China's Foreign Reserves Within a Three-Country Stock-Flow Consistent Model[END_REF].

  , in Chapter 12, introduce a two-country model where the exchange rate is determined endogenously. They assume that private-sector demand for foreign financial assets is always satisfied, and international reserves close the model. The exchange rate is pinned down by the demand for and supply of the central bank's reserves. Despite other possibilities, it is a common closure for the exchange rate in the literature. c) Public policy Like any macroeconomic model, the SFC model is an analytical tool designed to examine the effects of monetary, fiscal, or other macroeconomic policies. Fiscal and monetary policy are the most being analysed in the literature. The government and the central bank are included in the model to show how fiscal and monetary policy affect the economy. It can be

  and growth, they show that a new kind of Marshall Plan for Europe, using funds from the European Investment Bank or another EU institution, can arrest the declines in GDP and employment, reverse the trend and facilitate the recovery.Papadimitriou, Nikiforos, and Zezza (2014) consider various additional expansionary policy options for the Greek economy. They examined four alternative scenarios for restoring growth and increasing employment: "(1) external help through Marshall Plan-type capital transfers to the government; (2) suspension of interest payments on public debt, instead using these resources for increasing demand and employment; (3) introduction of a parallel financial system that uses new government bonds; and (4) adoption of an employer-of-last-resort (ELR) program financed through the parallel financial system" (p.1). They show that the effectiveness of the different plans crucially depends on the price elasticity of the Greek trade sector. The ELR policy option seems to be the best benefit for recovery due to the low elasticity, which will immediately affect the Greek population's standard of living while containing the effects of foreign debt.Another SFC model for the economy of Ecuador, adopting the three-sector (three balances) model, aims to examine the responses of the demand and supply of liquidity to the changes in the world price of oil and the changes in the exchange rate of Ecuador's competitors against the US dollar[START_REF] Zezza | On the design of empirical stock-flow consistent models[END_REF].Kinsella and Aliti (2013) built a model for Ireland. They outlined the theoretical and technical issues associated with creating a SFC macroeconomic model for a small open economy like Ireland.[START_REF] Kinsella | Towards a stock-flow consistent model for Ireland[END_REF] used their SFC model for Ireland with the calibration method for parameter values to test alternatives to Ireland's austerity and assess the prospects for recovery. They show that a sharp, one-period reduction in public expenditure by 11.5% would lead to a decrease in the liabilities of Irish government securities other than shares of about 14%, with different effects like a decrease in household income reductions in consumption and a slowdown of growth. These results have been shown via Irish Financial Balance Sheet.A SFC model of the Portuguese economy was developed by[START_REF] Sousa | A stock-flow consistent model of the Portuguese economy[END_REF]. The model is a continuous time with endogenous money and an integrated financial sector. The work replicated the 2008-2013 events called the benchmark case. Then, they considered several changes in some variables and analysed the outcomes, comparing them with the benchmark case. Several economic issues have been studied in the model, such as the trade-off between deficit reduction and GDP growth, the limited effect of looser credit standards on GDP growth in a small open economy, as in the case of Portugal, the effect of reduced sovereign interest rates in the government deficit or the ineffectiveness of cuts in government spending in achieving a deficit reduction. However, the model remains simple and has much room for improvement.In a work in Austria,[START_REF] Miess | Extension of the empirical stock-flow consistent (SFC) model for Austria[END_REF] propose a model with a very detailed financial sector. They choose to calibrate parameters over the past period and then project during the simulation period. Like several other empirical SFC models for whole countries, the model Austria is then used for medium to long-term forecasting, scenario-based policy evaluation/simulation, and providing the basis for policy recommendations. This model is the first for Austria and among a few empirical SFC models internationally.[START_REF] Burgess | A dynamic model of financial balances for the United Kingdom[END_REF] developed a more complicated SFC model using national accounts data.Parameters are both calibrated and determined by econometric estimations. Several scenarios, including increases in banks' capital ratios, sudden stops, changes in investment, increases in house prices and fiscal expansions, are simulated with the model, which is considered a medium-term scenario analysis tool.[START_REF] Passarella | A SFC model for Italy[END_REF] has built a medium-scale SFC dynamic model for the Italian economy using the theory-constrained but data-driven method. The model is inspired byGodley and Lavoie (2007b). The model then discusses alternative scenarios for Italian households' financial balance based on different government spending patterns. Zezza and Zezza (2020) developed a quarterly model for Italy with a detailed description of the private sector and the real and financial interactions between households, nonfinancial corporations, and banks.The first version of the SFC model of Argentina was developed by[START_REF] Valdecantos | Macroeconomic dynamics in Argentina in the light of a structuralist post Keynesian stock-flow consistent model[END_REF] in order to examine the macroeconomic performance of the developing country Argentina. The study tried to incorporate several important features in developing countries, such as credit constraints, high import elasticities, export-led growth strategies, exchange rate problems, and external debt. The work on Argentina has been pursued byValdecantos (2020). The paper addresses to what extent the economic performance would have been better had other policy combinations been implemented. An empirical quarterly SFC model for the period 2007-2019 was developed for Argentina. The simulation results show that "the problem keeping Argentina in stagflation goes beyond the domain of macroeconomics. In practice, two antagonistic macroeconomic programs were implemented, neither of them being able to produce a good and sustainable macroeconomic performance, is a first symptom that favours the case for that hypothesis". Another work on Argentina is by[START_REF] Michelena | Stock-Flow Consistent Model for the Macroeconomic Analysis of Argentina (SFARG)[END_REF], who developed an empirical model based on a social accounting matrix previously built by[START_REF] Michelena | Construcción de la matriz de contabilidad social (SAM) 2018 para la Argentina[END_REF]. The model intends to provide a benchmark for analysing economic performance under different economic policy scenarios and exogenous shocks. It consists of a single-good, open economy with five sectors (production, households, firms and banks, the government, and the rest of the world). The model provides an explicit description of price determination, the labour market, and portfolio choices. They analyse the effects of a negative exogenous shock in terms of trade and another shock where the growth of the rest of the world increases.[START_REF] Byrialsen | An Empirical Stock-Flow Consistent Macroeconomic Model for Denmark[END_REF] adopted the SFC approach to model the interdependencies between the real and financial sides of the economy in Denmark. The model is estimated using Danish data for the period 1995-2016. Then, they create a baseline scenario for the period 2017-2030 and simulate and analyse the effects of fiscal and interest rate shocks. Overall, the model can replicate the stylised facts of the Danish economy. The model structure explains several transmission mechanisms through which real economic behaviour can affect the balance sheets and simultaneously capture the feedback effects from the balance sheets to the real economy.A quarterly model for the Danish economy has been developed by[START_REF] Byrialsen | QMDE: A Quarterly Empirical Model for the Danish Economy[END_REF]. The purpose of the model is always to build a platform for analysing the interdependencies between the real and financial sides of the economy with model parameters estimated using quarterly Danish data over the period 2005-2020. They use numerical model solving and compare the model results with the original data to ensure that the model can capture the economy's dynamics. They examine the effects of a standard shock on public spending and explore whether the economy's response is in line with what is predicted by the theory.[START_REF] Mazier | A Stock Flow Consistent model for the French economy» in Macro-modelling, economic policy and methodology: economics at the edge[END_REF] developed an econometric SFC model of the French economy. The structure of the model is analogous to that of already existing national-level SFC models with demand-led dynamics, a Kaleckian accumulation behaviour and an indebtedness norm. A supply constraint results in a simple production function that determines potential output and allows for the computation of an output gap. The model provides examining of the effects of unconventional monetary policy.

  argued that the structure of an empirical SFC model should start from a careful analysis of the specificities of a country's sectoral balance sheets and flow of funds data, given the relevant research question at hand. It consists of a top-down approach. It is distinguished from a bottom-up approach, which starts with theoretical models and then selects country data to fit the theoretical model as close as possible. When building an empirical model, the first constraint is related to the availability and structure of the appropriate data. The paper shows how working with real-world data-flows can be consistently connected to stocks and deal with the data problem that emerges: "how to estimate a stock when only flow data are available, how to reconcile contradicting flows (such as estimates of net lending from different sources), and how to compute payments between sectors based on the available data for the stock of assets and liabilities of each sector". The second major contribution of this paper shows how to choose the level of detail and realism of the balance sheets of the various sectors since, in reality, every sector holds almost every asset and liability. The more assets one includes, the more realistic the model becomes and the more realistic features of an actual economy it can potentially capture. However, the model becomes more complicated and less intuitive.

  from different sources to build the balance sheet and transaction flow matrix. The System of National Accounts, 2008 (SNA 2008) is a statistical framework that provides a comprehensive, consistent and flexible set of macroeconomic accounts for policymaking, analysis and research purposes. The SNA 2008 (UN, 2009) is intended for use by all countries, having been designed to accommodate the needs of countries at different stages of economic development. It also provides an overarching framework for standards in other domains of economic statistics, facilitating the integration of these statistical systems to achieve consistency with national accounts.

  accounts representing economic activities within a given period of time (usually a year) is linked with the stock account -balance sheet, which records the stocks of assets and liabilities held by each institutional sector (Figure3.1).The flow accounts consist of current accounts and accumulation accounts. The sequence of current accounts shows how incomes are generated from production ( and operating (generation of income) account), distributed (allocation of primary income account) and redistributed among institutional sectors (secondary distribution of income account), used by them for consumption and saving (use of income account). Saving allows the sector to accumulate both non-financial and financial wealth. The accumulation accounts, which consist of the capital account, financial account and revaluation account, record flows that affect the balance sheets of the sector. While the capital account represents the acquisitions and disposals of non-financial assets, the financial account records financial assets and liabilities. The financial account also shows how each sector finances its financing need, especially through financial intermediaries. Finally, the revaluation account records those changes in the values of assets and liabilities due to the changes in their prices.

  the World (ROW) Non-financial corporations sector is principally engaged in producing market goods and non-financial services. It includes private corporations, cooperatives, and public producers. Commercial banks have the principal activity of production of financial services (financial intermediation and auxiliary financial activities). The government sector produces non-market services and redistributes income or wealth among different sectors. The household sector comprises consumers, individual entrepreneurs (market producers) and producers exclusively for their own final use. The rest of the world sector in our model includes non-resident transactions within our economy.flow reflects the flow of real resources in the economy. The data of the banking system is the monetary survey of the IFS. Monetary statistics accounts are critical for analysing monetary conditions and formulating and implementing monetary policy. In other words, the link between the monetary sector and other economic sectors plays a vital role in the monetary policy design. The financial system has two components: one is associated with commercial banks named "Banking institutions" and one associated with the central bank named "Monetary Authorities".

  commercial banks (L B CB ) Commercial bank deposits in Central bank (D CB B ) Foreign reserves in Central bank (R CB ) Currency item (C) is the amount of currency issued by the central bank. The domestic credit to the government (L G CB ) represents the role of the central bank as the banker of the government. The domestic credit to commercial banks (L B CB ) and the commercial bank deposits in the central bank (D CB B ) allow control of the money supply. Finally, the foreign reserves held by the central bank (R CB ) contribute to the exchange rate policy.The same convention is followed for the commercial banks sector. Their balance sheet reflects their functions (Table3.2). Banks facilitate savings by offering deposits (T ). Banks provide loans (L P B ) to other sectors of the economy. That is why it represents an asset for banks. Commercial banks are an important channel transmission of monetary policy (D CB B ).

  we get : Net domestic credit from banking system (Net domestic assets) = L G CB + L P B = L Foreign reserves (Net foreign assets) = R CB + R B = R (In the IFS, all foreign-currencydenominated assets and liabilities are converted into domestic currency units at market exchange rates.) Money supply = C + T = MTherefore, by definition, money is equal to the sum of domestic credit from the banking system and foreign reserves in the banking system.

  extend to other sectors from the balance sheet of the central bank and commercial banks, we mainly use two technical solutions, which are counterpart and residual data. Both of them lead to making simplified assumptions about creditors and debtors (from-whom-to-whom) of a financial instrument. It implies that for each financial instrument, the sum of the net acquisitions (including those of the rest of the world) must equal the sum of the net incurrence of liabilities. If data are unavailable, the accounting identity can give a residual sector, which ensures the total balance of the transactions or stocks in a financial asset/liability.In order to compile financial statistics for all sectors of the economy, we need to use different macroeconomic data sources and other administrative records, survey data, and market data outside the aggregated macroeconomic database. However, these data for financial statistics usually only cover some flows and stocks for financial instruments and institutional sectors. The financial instruments of the balance sheet of the financial system above include International reserves (R), Cash (C), Banks'reserves (R B ), Deposits (T ), Advances (D CB B ) and Loans (L). Based on the macroeconomic analysis in Chapter 1 related to the balance of payments and the financial development of Viet Nam, we add some relevant financial instruments (Bonds, Foreign Loans, Equity and Foreign Direct Investment) for the economy to obtain the national balance sheet. Table3.4 represents the simplified balance sheet of Viet Nam. We change the notations for financial instruments to harmonise with that of variables in our model in the next chapter.

Bank' s

 s Reserves come from International Financial Statistics. It means the reserves which commercial banks must hold in the form of deposits in the central bank. Governments's Deposits are taken from International Financial Statistics. The government can have deposits at the central bank and commercial banks. Dong Deposits are reported in the database of the SBV. In the Vietnamese economy, firms and households hold deposits in domestic currency in commercial banks. Foreign deposits are obtained from International Financial Statistics. The data shows that both firms and government have foreign currency deposits in commercial banks. Bonds are derived from International Financial Statistics. For simplicity, we suppose that government bonds are mainly held by commercial banks and the central bank. Advances are taken from International Financial Statistics -Banking Institutions accounts. It means the credit from monetary authorities to commercial banks.Loans come from International Financial Statistics -Account of banking institutions. It corresponds to the variable "Claims on Private Sector". We suppose that Vietnamese commercial banks provide loans for the private sector, which combines firms and households. However, household debt is obtained from the report of South East Asian Central Banks.Foreign loans are derived from three main sources: Bank for International Settlements (BIS), World Development Indicators, World Economic Outlook and Lane-Milesi-Ferretti database (LMF). In our model, for simplicity, we suppose that firms, government and banks borrow from abroad. The BIS consists of data on assets and liabilities reported by banks vis-à-vis residents of other countries (banks and nonbanks). The foreign loans of the government are taken from the World Bank database.Equity are taken from several sources. Equities issued by firms are reported on the Ho Chi Minh Stock Exchange. Bank's equities are derived from International Financial Statistics.

  respectively. The remaining sectors are produced by the private sector combining firms and households. The value-added of the household sector is taken from the GSO. The firm's sector is determined as a residual. The intermediate consumption and the output are deduced based on the SAMs.We then pass to the operating account, which represents the contribution of labour and capital to the production process. This account indicates that the incomes of each sector are a consequence of their involvement in the production process. For example, wages and income from abroad are received by households in return for their labour input. The distribution of capital appears in the form of gross operating surplus or mixed income. Wages are deduced from the cell of value added by a factor of production -labour in the SAMs. Income from abroad is based on the balance of payments. Taxes variables are derived from the State Budget and the WDI.The allocation of primary income account records the capital incomes paid and received by the various institutional sectors, which depend on their asset/liability structure. It includes interest payments and dividends from investments. The balancing item of this account is the primary income balance. Because we do not have all financial flow data, interest payments are mainly derived from the stock data and the interest rate. The lending rate and deposit rate are taken from the IFS. The refinancing rate is the monetary policy-related interest rate.

  firms and commercial banks can change. For other assets, mainly in foreign currency, the revaluation effects come from the change in the exchange rate. Specifically, the change in the value of FDI is made up of a change in price and exchange rate. For the sake of simplicity and given that the dollar stays dominant in foreign transactions, we consider the exchange rate of the US Dollar to the Vietnamese Dong in our model.

Figure 3 .

 3 Figure 3.4 shows our estimates for the three financial balances in the economy. A downward trend in the financial balance represents the contribution of that sector to aggregate demand.

  to the Law on the State Bank of Viet Nam in 2010, the State Bank of Viet Nam (SBV) performs (i) the state management of monetary and banking activities and foreign exchange, (ii) the issuance of money, and acts as the bank of credit institutions and provides monetary services for the Government and (iii) the state management of public services under the jurisdiction of the State Bank. The objectives of SBV are inflation control, stabilisation of the macro-economy, supporting economic growth and ensuring the liquidity of credit institutions. In order to achieve these objectives, the SBV can use a set of tools, including interest rates tools, exchange rates, reserve requirements, open market operations and other tools, depending on the macroeconomic conditions. In our model, we suppose that the central bank determines the refinancing rate as a monetary policy tool and the bank's reserves. They provide advances to commercial banks. The central bank plays the role of a lender of the last resort by purchasing all remaining government bonds. The central bank intervenes in the foreign exchange market to respond to changes in the exchange rate.

  banking system from one-tier to two-tier, including the SBV as a central bank and commercial banks, the development of equity and bond markets to facilitate access to finance for firms in the economy. The ratio of deposits to GDP and credit to GDP have increased sharply since 1999. The market capitalisation rose dramatically in 2007. However, there was a reduction during the global financial crisis in 2008-2009 and the Vietnamese banking crisis in 2011, but it has rapidly recovered since 2012. Commercial banks finance the economy by offering credits to firms and households in our model. We also try to model the credit rationing on firm and household loans, representing a financial constraint to the sectors. The lending and deposit rates are determined on the basis of the central bank's interest rate. Using the same definition in the case of firms, the operating surplus can be written as:

  external imbalances reflect the financing need of the economy to fund domestic consumption and investment through different forms of financial flows. Before 2005-2006, Viet Nam registered a negative current account mainly driven by a trade deficit. The high domestic demand was satisfied by imports. Moreover, the global financial crisis of 2007-2008 caused a reduction in world demand, which decreased Vietnamese exports and led to a more significant trade deficit. However, since 2012, the current account has become positive, resulting from a trade balance and a secondary income surplus offsetting the deficit in the primary income balance.

Foreign

  direct investment p F DI F DI us xr Other accounts r/p OT A r(*) Net Wealth NW r (*) Item closes the sector's account The financial account represents the financial side of the current account. A large deficit current account can face the critical question of external debt sustainability and be exposed to the risk of sudden stops. In Viet Nam, capital flows into the country mainly in the form of FDI and portfolio equity investment. Viet Nam has received FDI since the 1980s and has been considered an essential factor in Vietnamese economic growth. Up to 31/12/2019, Viet Nam has accumulated 30943 FDI projects with a total registered capital of 363,309 Billion USD.

  1) such as the Asian crisis in 1997, the wage reform in 2004-2005, WTO accession in 2007, the global financial crisis in 2008 and the banking crisis in 2011-2012. In addition, financial data and flow data certainly have measurement errors. The solution from econometric methods is to add the event-specific dummy variables. It allows removing outliers by including as many dummies as necessary to get a better fit to the observed series.

  * * p<0.05; * * * p<0.01

Figure 4 .

 4 Figure 4.2 shows the simulated results and the actual data of the real GDP and components of GDP. The model replicates quite well the historical data of these series.Regarding the sectoral financial balances (Figure4.3), overall, the model could track satisfactorily aggregate sectoral financial balances. The discrepancies between the simulated value from the model and the actual value can be explained by the accumulation of errors at some points. Moreover, it may be due to data limitations related to the huge statistical discrepancies between the net financing capacity from the real side and that from the financial side. As shown in Figure4.3, we overestimate the net financial balance for the households sector since 2015, corresponding to the underestimation of the rest of the world.Looking at the financial assets and liabilities, the model can track the dynamic trend of variables. Concerning the labour market, the nominal wages are tracked satisfactorily. Price variables, as well as interest rates in the model, are all replicated well. All results are displayed in Appendix. Overall, our model can track the dynamics of the Vietnamese economy to some extent. Thus, we move to simulate the model in the future and analyse the effects of different scenarios on the economy.

  led to the suspension of entry for all foreigners from 22 March 2020. Coming back to Viet Nam, the Vietnamese from abroad had to spend 14 days in full quarantine. From 1st April 2020, all Viet Nam conducted social distancing (people stay at home except for essential and emergency outings and closing non-essential businesses) for 15 days. No new cases of community transmission were detected in Viet Nam for a period of 99 days until 25 July. It partly allowed economic activities to continue.Viet Nam entered the second wave of infection when the COVID-19 community transmission was detected in Da Nang, including the country's first deaths from the virus, which mainly included patients with underlying severe diseases in the Da Nang Hospital cluster. As of 31 August 2020, Viet Nam reported 1,040 cases, with 32 deaths. Globally, Viet Nam had a relatively low number of cases compared with most other countries. With the reintroduction of physical distancing measures throughout areas deemed high-risk, Viet Nam was undergoing a period of three months without any infection cases in the community. After six months of suspension, commercial flights were resumed between Viet Nam, Japan, and South Korea.Economic activities were resumed.The third wave of infection began on 28 January 2021, when Viet Nam recorded community transmission cases in Hai Duong and Quang Ninh provinces. In this new phase, the government only quarantined the areas directly related to the infected people to limit the economic impact. But the number of cases still increased; on 15 February 2021, Hai Duong province was locked down for 15 days, and other big cities such as Hanoi and Ho Chi Minh city stopped all entertainment activities. Since March 2021, the situation in northern provinces had been under control when the number of new cases fell to single digits. At the same time, Viet Nam started its mass COVID-19 vaccination campaign. From the end of April 2021, Viet Nam experienced "a fast-spreading outbreak." Many cases were found in industrial parks in Bac Giang province and other prominent hospitals. This time, it was nearly impossible to use tracing management and cut the chain of infection due to the spread of the virus in many provinces of Viet Nam. The situation worsened after the four-day holiday for Reunification Day and International Workers' Day, and on 26 July 2021, Ho Chi Minh City imposed a daily night curfew. This implied that people could not leave the city except in an emergency. The government also mobilised 10.000 troops to the city to enforce the lockdown and deliver food supplies. After several months, in November 2021, COVID-19 came under control nationwide.ministries, central and local authorities, and agencies to implement solutions to accelerating public investment disbursement drastically. Thus, the realised capital growth rate from the government budget in 2020 reached the highest from 2016 to 2020.Targeting the people who were affected by the COVID-19 pandemic, according to Resolution No.42/NQ-CP on 9th April 2020 and Decision No.15/2020/QD-TTg, social security policy provided the guides for assistance and implementation of policies to support people facing difficulties caused by the COVID-19 pandemic, respectively. Accordingly, about 62,000 billion VND (around 0.96%GDP) would be disbursed for roughly 20 million workers who lost their jobs due to the impact of the pandemic. However, the people who received support were mainly from the group of workers belonging to the insured sector and poor households. Meanwhile, workers that were significantly affected are freelance ones, and workers in the informal sector have no access to this support. The implementation of direct support policies had faced a significant barrier because there was no database to manage information about beneficiaries, leading to the complicated application-for-support procedure, bringing inconvenience to people.In 2021, facing the fourth wave of the pandemic, Viet Nam issued Resolution 68, unveiling financial incentives for employers and employees affected by COVID-19. The support package was worth around 1.13 billion USD.

6. 5

 5 to 7 per cent between 2021 and 2025. Under this resolution 43, around US$15 billion was approved. It consists of both fiscal and monetary policies (Figure 5.36). In terms of fiscal policies (Figure 5.37), a 2 per cent reduction in VAT (from 10% to 8% in 2022 and 2023), as well as CIT deduction for businesses, was announced. There were different incentive measures. The government was committed VND 14 trillion (US$620 million) to the health sector, including improving facilities, disease control, hospitals, and human resources related to COVID-19. A fund of around VND 5 trillion (US$220 million) was allocated to Viet Nam Bank for Social Policies for preferential loans. This included investment in job training, vocational education, and social security. A package of VND 40 trillion (US$1.76 billion)

  Chapter 1 gave us an overview of the government account. The government collects taxes, receives other transfers or payments, and then consumes and invests. The government's current expenditures and public investment are exogenous as policy instruments. The public deficit can be financed by issuing bonds or borrowing from abroad. The Vietnamese public domestic debt has sharply increased since the 2010s with the development of the domestic bond market, while the proportion of external debt gradually decreased(Figure 5.38). Before 2013, the government financed its deficit mainly by borrowing from abroad. There was recovery plan are considered. It consists of both fiscal and monetary policies, as simulated in our previous Section.

  at the core of research in a number of subjects, as presented in Chapter 2, such as ecological macroeconomics. The next chapter of the thesis will investigate the macroeconomic impacts of climate change and adaptation measures on Viet Nam using the SFCVN model. Viet Nam to pay more attention to climate change adaptation strategy. Climate change responses are mainstreamed in the national strategy to ensure that they align with the country's socio-economic and sustainable development plans. The ND-GAIN ranked Viet Nam 92th out of 192 countries in terms of readiness to respond effectively to climate change. Readiness measures a country's ability to leverage investments and convert them to adaptation actions. ND-GAIN measures overall readiness by considering three components -economic readiness, governance readiness and social readiness. The priority sectors for adaptation include agriculture, transport, infrastructure and urbanisation, natural resources, industry and trade, public health, and tourism. Financial help for implementation shall be mobilised through different channels, including the state budget (central and local budgets), international funding, the private sector, and community contributions. At the 26th United Nations Climate Change Conference of the Parties (COP26), Viet Nam declared its commitment to achieving net zero by 2050 and phasing out coal power between 2030 and 2040. This announcement by the Vietnamese Prime Minister Pham Minh Chinh has surprised the international community. A National Steering Committee was established to direct programs, projects and prioritised tasks in response to climate change and to promote the energy transformation required to fulfil Viet Nam's commitments. The current draft of the Power Development Plan VIII (PDP8) is expected to be significantly overhauled in order to create much more room for renewable energy and sustainable energy solutions. Net zero emissions require profound structural change and will demand substantial new investments in green technologies, sustainable infrastructure and increased resource productivity. Given the high degree of openness of the Vietnamese economy, a net zero emissions target could lead the country to face a "Green transition trilemma"(Valdecantos, 2020). External financial sustainability, internal economic development and environmental sustainability can be antagonistic objectives unless specific macro-financial conditions can be met. Thus, assessing climate change impacts and adaptation is crucial for policy planning at the macroeconomic level. This chapter aims to develop an integrated prospective economy-wide assessment to analyse the economic impacts of climate change and adaptation measures in the context of a greener industrialisation process for Viet Nam. Beyond this introduction, this chapter has three other sections. Section 6.2 gives an overview of climate change and climate policy in Viet Nam.

  and rainfall) and sea level rise in Viet Nam. The information related to climate change scenarios, especially temperature, is an essential input for climate change impact assessment in the following sections.TemperatureThe observed trend in Vietnamese temperatures shows an overall increase during the period 1981-2018, with the most significant increases recorded in recent years(2011)(2012)(2013)(2014)(2015)(2016)(2017)(2018). The increases vary between regions (Figure6.1), but the average annual temperature across the country increased by 0.78°C over the period 1981-2018. That is equivalent to an increase of around 0.205°C per decade. The highest increases were recorded in the Central Highlands in autumn and the North Delta in spring. The lowest increase was in summer in the Northeast and North Central regions.

  -economic changes in Viet Nam in the 1980s and 1990s contributed to a successful structural transformation but benign neglect of environmental degradation. The Doi Moi reforms were mainly characterised by four factors: growing diversification of capital investment, land use rights as a commodity, commercialisation of the housing sector and slow changes in the planning system. Another implicit factor was the devolvement of power to local authorities. Many problems resulted from such a rapid and uncontrolled housing market and residential construction boom. The spontaneous housing boom led to chaos in urban development and drastic changes in Vietnamese cities' urban landscape. In the early days of the economic reforms, the Vietnamese government did not consider the issue of the GHG produced by wet rice agriculture, nor did it take the toxic effects of chemicals in agriculture and industrial pollution into account. For the Party, economic growth objectives took priority over environmental concerns. This priority for rapid development did not preclude building a state environmentaldepartment. Indeed, in 1986, the Vietnamese government established a Committee for the Rational Use of Natural Resources and Environmental Protection that produced the National Conservation Strategy. The Council of Ministers Ordinance on the Transfer of Foreign Technology to Viet Nam of December 1988 also highlighted environmental protection concerns.The next important step was the Environmental Protection Law, which was approved in 1993. Viet Nam introduced a system of national pollution standards and environmental safeguards and guidelines in the mid-1990s. This framework imposed a system of environmental impact assessments for area-based land-use plans and zones. Environmental audits were conducted, and environmental management plans were imposed on existing plants. The 1993 Environmental Protection Act laid the foundations for Viet Nam's legal framework on the environment. It defined basic concepts associated with the climate and environmental protection and included specific provisions on the rights and responsibilities of organisations and individuals for environmental protection. However, the Act also revealed limitations that had to be addressed amid the country's efforts to boost industrialisation and modernisation in the frame of globalisation and world economic integration.Climate change as a driver of Vietnam's global integrationIn the 2000s, climate change could be considered a driver of Vietnam's global integration. Viet Nam ratified most international environmental framework agreements, such as the UNFCCC in 2003, the Paris Climate Agreement (COP21) in 2015, the 2030 Agenda on Sustainable Development that same year and the Nagoya Protocol on Biodiversity and, more recently, the Glasgow Climate Pact at the UN Climate Change Conference (COP26) in Glasgow. This acceleration of Viet Nam's participation in the global climate arena is concomitant to its insertion in globalisation. The achievement of WTO membership in 2006 marks a milestone in Viet Nam's integration into the world. As a result, the updated Environmental Protection Act of 2005 introduces fundamental and comprehensive amendments to adapt the country's environmental legislation to a market economy and its integration into the global economy. Other significant environmental legislation includes the 2003 Land Act, the 2004 Act on Forest Protection and Development, the 2007 Act on Chemicals, the 2008 Act on Biodiversity, the 2010 Minerals Act, the 2010 Act on Environmental Protection Tax, the 2010 Act on the Economic and Efficient Use of Energy and the 2012 Act on Water Resources. After the Paris Agreement at COP21, the National Plan for the Implementation of this Agreement (PIPA) was approved in 2016 with adaptation, which is one of the five main components of the PIPA. The 2020 update of Viet Nam's Nationally Determined Contribution (NDC) was submitted to the Secretariat of the UNFCCC in September 2020. The updated NDC 2020 contains new policies on adaptation and response to climate change: (i) the National Adaptation Plan for the 2021-2030 period, with a vision through to 2050 (NAP) and a focus solely on adaptation; (ii) the post-2020 National Strategy on Climate Change (NSCC) and (iii) the National Action Plan to Respond to Climate Change (NAPRCC) for the 2021-2030 period. It gives ministries, sectors and localities specific directions to continue developing and implementing climate change adaptation actions in line with the socio-economic development plan.In the past decade, the faltering "environmental state" that emerged after Doi Moi has been transformed into an all-embracing effort to envisage the potential impacts of climate change and, with the active support of the international community, to put in place adaptation strategies. Most development aid has indeed been targeted at activities and projects intended to contribute to the fulfilment of the Paris Agreement or at least to a green growth strategy. This has transformed the practices of Viet Nam's ministries and institutes without completely redirecting the country's development trajectory. Some more immediate anthropological factors that have contributed to environmental degradation may also have been incorporated into the broad "climate adaptation" narrative in order to attract foreign investors.Recognising that the revised Environment Protection Act of 2014 has proven too weak to tackle environmental pollution effectively, Viet Nam's National Assembly passed a decision to revise the Act in June 2019. The new act represents the most significant modernisation of Viet Nam's environmental law regime. The aim is to reinforce its impact and strengthen compliance with the law. Besides improved regulations and permits, better economic instruments, enhanced environmental impact assessments and improved institutional governance, one focus is on updating the chapter on climate change. Indeed, this updated environment law reflects the institutionalisation of the key national strategies of developing a low-carbon economy resilient to climate change and promoting the circular economy.A real ecological turning point in Vietnam's development pathAs one of the countries in the world hardest hit by climate change, Viet Nam needs to make the economy grow green and do so quickly in order to protect against the risk of rising sea levels and increased extreme weather. The Green Growth Strategy was developed in order to accelerate the process of economic restructuring with the aim of making efficient use of natural resources, reducing GHG emissions through research and the application of green technologies, and developing the infrastructure in order to improve the overall economic efficiency, coping with climate change, contributing to poverty reduction and creating the momentum for sustainable economic development. The technological level of the world and Viet Nam is increasing with the fourth industrial revolution (Industry 4.0). The technology that can promote energy efficiency and enable the circular economy to be more productive through eco-innovation and technology transfer will contribute to sustainable development and the mitigation of GHG emissions. Indeed, technological advances can indirectly reduce pollution levels through the more efficient use of inputs, while filters or waste cleaning devices directly reduce pollution levels. The amounts of polluting waste from industries can drop while production increases if clean and advanced technologies induce such a rise.In addition, the updated NDC, approved in 2020, confirms Viet Nam's utmost commitment to cut GHG emissions -the primary cause of the earth's rapid climate change. The target is to reduce GHG emissions by 9 per cent by 2030, 1 percentage point higher than the target set in 2015. This could be further increased to 27 per cent with international support through bilateral and multilateral cooperation and mechanisms under the Paris Agreement. This updated NDC included not only mitigation and adaptation policies but also the impacts, advantages and challenges of NDC implementation and a plan for NDC implementation and the monitoring and evaluation of implementation. Indeed, mitigation measures are identified for the period 2021-2030 in the following sectors: energy, agriculture, waste, land use and industrial processes (IP). The possible measures in the energy sector include improving energy-saving and energy efficiency and reducing energy consumption; changing the fuel and energy structure in industry and transportation; shifting passenger and cargo transportation models; promoting the efficient exploitation of renewable energy sources; and increasing their proportion in energy production and consumption. In agriculture, reducing GHG emissions can be achieved through sustainable agricultural development: improving the effectiveness and competitiveness of agricultural production, managing and developing sustainable forests, enhancing carbon sequestration and environmental services, conserving biodiversity associated with economic development and increasing incomes for forest-dependent communities and people. Waste needs to be managed. The industrial process must replace construction materials and improve cement and chemical production. The main objectives of the adaptation component are improving adaptive capacity, enhancing resilience, and reducing the risks caused by climate change, which contributes to achieving the country's sustainable development goals. It involves strengthening state management and resources, increasing the resilience and adaptive capacity of communities, economic sectors and ecological systems and reducing disaster risks and minimising damages and preparing to cope with increased natural disasters and climate extremes due to climate change. These strategic tasks are consolidated in the National Adaptation Plan (NAP) and the National Action Plan on Climate Change. At COP26, Viet Nam declared its commitment to achieving net zero by 2050 and phasing out coal power between 2030 and 2040. A National Steering Committee was established to direct programs, projects and prioritised tasks in response to climate change and to promote the energy transformation required to fulfil Viet Nam's commitments. The current draft of the PDP8 is expected to be significantly overhauled in order to create much more room for renewable energy and sustainable energy solutions. However, Viet Nam needs to work more on concrete strategies, plans and actions, such as reducing the use of fossil fuels (especially coal)

  studies evaluating the impacts of climate change and adaptation in Viet Nam usually focus on specific sectors or regions, as shown in the different meta-analysis and sectoral assessments in the second part of this report. Few studies seek to assess the economy-wide effect of climate change. Arndt, Tarp, and Thurlow (2015) evaluated climate impacts on economic growth and welfare in a dynamic computable general equilibrium (DCGE) model via three principal mechanisms: crop yields, hydropower production and regional road networks. This latest study provides insights into the potential macroeconomic effects of different climate scenarios from the previous IPCC report. World Bank (2022) assessed the potential economic losses associated with climate change in Viet Nam by using two complementary models. The first is the World Bank's Mitigation, Adaptation, and New Technologies Applied General Equilibrium (MANAGE) model, which aims to capture the impacts of climate change on future economic growth. The second is a probabilistic catastrophe model to estimate the economic impacts of extreme events such as typhoons. Contrary to standard CGE models, the SFC model that we have specifically developed for the Vietnamese economy combines real side variables with financial balance sheet effects. Indeed, over the last three decades, the Vietnamese economy has been integrated into the world economy and undergone an important financialisation process. Increased integration with other countries has contributed to income growth, but it has caused an economic vulnerability in the context of rising trade tensions. The global financial crisis of 2008, the ensuing Vietnamese banking crisis of 2011, and the recent COVID-19 pandemic -all mostly macroeconomic shocks

  to develop the sector-specific damage functions for agriculture, namely[START_REF] Yu | Impacts of climate change on agriculture and policy options for adaptation: The case of Vietnam[END_REF],[START_REF] Li | Impact assessment of climate change on rice productivity in the Indochinese Peninsula using a regional-scale crop model[END_REF],[START_REF] Kontgis | Climate change impacts on rice productivity in the Mekong River Delta[END_REF],[START_REF] Deb | Assessment of the impacts of climate change and brackish irrigation water on rice productivity and evaluation of adaptation measures in Ca Mau province, Vietnam[END_REF],[START_REF] Shrestha | Adaptation strategies for rice cultivation under climate change in Central Vietnam[END_REF].[START_REF] Yu | Impacts of climate change on agriculture and policy options for adaptation: The case of Vietnam[END_REF] first estimate the impacts of climate change on agricultural and water systems in Viet Nam based on crop simulation, hydrological simulation, and river basin models. Then, by using a multilevel mixed-effects model, they implement a Cobb-Douglas yield function to model technology advances and policy interventions to mitigate the impact of climate change. The World Food Studies simulation model and the empirical hydro-crop model are used jointly to analyse the impacts of changes in rainfall and temperature on crop yields.The aim of[START_REF] Li | Impact assessment of climate change on rice productivity in the Indochinese Peninsula using a regional-scale crop model[END_REF] is to assess the impact of projected climate change on rice productivity in the Indochinese Peninsula and test whether adaptive measures such as adjustment of planting dates, adoption of irrigation, and the use of heat-tolerant varieties can counter any negative climate impacts. Large-scale climate variables from the GCM HadGEM2-AO were dynamically downscaled with regional climate models, namely YSU-RSM, RegCM4, and HadGEM3-RA. The crop model chosen by the authors was the GLAM-rice We define the effective agricultural production (Q * At )Q * At = (1 -D AGRt * γ RICE ) * Q At (EQ.DMG.1)where γ RICE is the part of rice in agriculture; Q At is the gricultural production of baseline scenario and D AGRt is the production loss due to climate change.The agriculture damage function is given by:D AGRt = ν AGR * ∆T (EQ.DMG.2)where ∆T denotes the temperature change. Following the same modelling implication, EQ.DMG.3 represents the effective energy production (Q * Et ) with climate change damage (D Et ) on the hydropower production.Q * Et = (1 + D Et * γ HP ) * Q Et (EQ.DMG.3)where γ HP is the part of hydropower on the energy sector; Q Et is energy production of baseline scenario.D Et = ν HP P * ∆T + ν 2 HP P * ∆T 2 (EQ.DMG.4)Regarding the damage to energy demand, the effective final consumption depends on the part of electricity consumption in the total consumption (γ RE ) and the climate impact (D REt ). C * t = (1 + D REt * γ RE ) * C t (EQ.DMG.5) EQ.DMG.6 is the damage function which shows how the temperature change affects the residential electricity consumption of households. D REt = ν RE * ∆T (EQ.DMG.6)

  ln(N BW t ) = [λ 0 + λ 1 * ln(y t-1 ) + λ 2 * ln(pop ACT IVt )] * (1 -D Lt ) (EQ.DMG.7)We define the labour productivity loss due to climate change as follows:D Lt = ν L * ∆T (EQ.DMG.8)The climate impact on the mortality rate equation is represented as:M ORT * GRt = (1 + D Mt ) * M ORT GRt (EQ.DMG.9)where M ORT GRt is the mortality rate of the baseline scenario and D Mt is the mortality damage which is a function of temperature change.D Mt = ν M * ∆T (EQ.DMG.10)The equation that determines the total factor productivity is equal to:T F P * t = (1 -D T F Pt ) * T F P t (EQ.DMG.11)where T F P t denotes the TFP of baseline scenario and D T F Pt is the damage function on TFP D T F Pt = ν T F P * ∆T (EQ.DMG.12)6.3.3 SimulationTo simulate different climate change and adaptation scenarios, we create a baseline scenario broadly aligned with current Vietnamese greener industrialisation and modernisation strategies and the socio-economic development trends of Viet Nam and the world. Climate change impacts are simulated by adding the damage functions. The baseline scenario is the scenario in which climate change impacts are ignored, and the alternative scenario is that in which climate change impacts are simulated. Regarding the climate scenarios, low, intermediate, high and very high GHG emissions scenarios (RCP2.6, RCP4.5, RCP6.0 and RCP8.5, respectively). A common set of reference years and periods are adopted for assessing climate change impacts: the reference period 1980-2019, the period 1850-1900, which approximates pre-industrial global surface temperature, and the future reference period covers the period 2020-2050. The annual temperature changes are the difference between the projected temperature of the future reference period and the reference period 1980-2019. As mentioned above, climate change and its impacts are projected to intensify in Viet Nam urging Viet Nam to pay more attention to climate change adaptation strategy. Different official documents are dedicated to climate change adaptation, such as NSCC, NAPRCC and Law on Environmental Protection 2020. Climate change responses are mainstreamed in the national strategy to ensure that they align with the country's socio-economic and sustainable development plans. Especially, Viet Nam has adopted the National Adaptation Plan (NAP), representing a comprehensive and specific framework at the national level for planning, designing, and implementing climate adaptation measures. Adaptation investments are classified into three categories corresponding to three main adaptation targets, including (i) strengthening resilience and enhancing adaptive capacity; (ii) mitigating risk and damage from climate change-related disasters and enhancing preparedness to respond to extreme weather and natural disasters; and (iii) strengthening national adaptive capacity through institutional improvement, capacity-building, securing resources, promoting international cooperation, and implementing international obligations. The NAP provides direction towards an effective and efficient allocation of resources, financial and technical management, and cross-sectoral and multilevel coordination. Following national adaptation policies, ministries and provincial authorities will develop their adaptation policies. Regarding budget, adaptation costs are mainstreaming in national budgets, and Viet Nam was the first to prepare Climate Change Public Expenditure and Institutional Reviews (CPEIRs) among Asian countries.

  based on two main references related to the adaptation investment. The first one is the working paper of the World Bank named Climate modelling for macroeconomic policy: A case study for Pakistan (World Bank, 2022). The article describes the changes made to the World Bank's standard macro-structural model, MFMod, in integrated climate outcomes, climate policies, and the economic impacts of climate on Pakistan's economy. PAKMod represents the mechanism of the effects of adaptation investment to reduce the damages from climate events. The costs of adaptation investments will be assumed to be recorded in a budget tagging exercise. They do not consider private-sector adaptation. The effectiveness of adaptation is represented via a protection function. The approach here follows that of De Bruin, Dellink, and Tol (2009) and De Cian et al. (2016). Adaptation investment is an adaptation in the capital that does not have productive use. Adaptation capital works only to reduce damages. PAKMod considers adaptation public investment. The second study is the International Monetary Fund paper on the fiscal policies to address climate change in Asia and the Pacific (IMF, 2021). They analyse how Asia and the Pacific adapt to climate change and the fiscal costs of adaptation measures. To assess the implications of adaptation investment, they consider an annual increase in public investment of 2 per cent of GDP and compare it with the baseline scenario of no additional investment. They analyse the effect of public investment efficiency, calibrated at 60 per cent in the baseline, and 30 and 90 per cent in low-and high-investment efficiency scenarios, respectively.

  measures will be reflected by imposing changes in model parameters. The model simulation will generate a baseline scenario, in which climate change impacts are ignored with no adaptation, and alternative scenarios, in which climate change impacts are simulated and adaptation measures are taken into account.Regarding the climate scenarios, according to the IPCC report released in 2022, low, intermediate, high and very high GHG emissions scenarios are considered in this section (SSP1-2.6, SSP2-4.5, SSP3-7.0 and SSP5-8.5, respectively). Under the four illustrative scenarios, in the near term (2021-2040), the 1.5°C global warming level is very likely to be exceeded under the very high GHG emissions scenario (SSP5-8.5), likely to be exceeded under the intermediate and high GHG emissions scenarios (SSP2-4.5 and SSP3-7.0), more likely than not to be exceeded under the low GHG emissions scenario (SSP1-2.6).A common set of reference years and periods are adopted for assessing climate change impacts and potential impacts of adaptation measures: the reference period 1980-2019 and the period 1850-1900 approximates pre-industrial global surface temperature, and the future reference period covers the period 2020-2050. The annual temperature changes are the difference between the projected temperature of the future reference period and the reference period 1980

  12.2% GDP relative to the baseline scenario by 2050 under RCP8.5. This could prevent Viet Nam from achieving its development target, which is set at about 7% GDP growth annually during 2021-2030 and becoming an industrialised country by 2045. This urges Viet Nam to pay more attention to climate change adaptation strategy in order to improve resilience, mitigate possible negative impacts and achieve the country's development targets. Viet Nam is currently quite active in responding to climate change. The recently revised Environmental Protection Law, unlike the previous version, dedicates a separate article on climate change adaptation with concrete regulations on climate change impact assessment, adaptation activities, monitoring and responsibilities. In the National Adaptation Plan during 2021-2030, a vision for 2050, Viet Nam is preparing for a separate Law on climate change.

  SFCVN model described in detail in Chapter 4 provides a theory-consistent representation of the general structure of the Viet Nam economy and offers policy/scenario simulation capabilities to the needs of policymakers. The model comprises six institutional sectors with behaviours that integrate both the real and financial sides of the economy. There were two types of equations: accounting and behavioural equations. Several structural parameters were estimated using annual data from 1996-2019 with Vector Error Correction Models (VECMs), which lead to the corresponding Error Correction Mechanisms (ECMs) for each specification, or OLS regression. The simulation results show the model's overall performance in replicating the system's dynamics by comparing it with the historical data. We made use of the model to simulate the effects of different economic policies or shocks on the Vietnamese economy. The model served as a macroeconomic analysis framework focusing on various transmission channels, which is helpful for discussions of policy relevance (Chapter 5). In the case study of the policy responses to cope with the COVID-19 pandemic, the simulation results from the model show that stimulus packages and recovery plan are effective policy interventions to cope with the COVID-19 pandemic. However, it raised the financing need of the government and then could cause the deterioration in public deficit and an increase in public debt. Our SFCVN model also contributed to the research related to the assessment of the macroeconomic impacts of climate change and adaptation measures on Viet Nam (Chapter 6). The loss due to climate change could prevent Viet Nam from achieving its development target and urge Viet Nam to pay more attention to climate change adaptation strategy in order to improve resilience. Albeit time-consuming, the model proved its capacity/potential as a useful macroeconomic analysis/policy simulation, taking into account the different economic and social development objectives of Viet Nam, its ambitious net-zero emissions target by 2050 and just transition in the coming years.

Table 1 .

 1 1 Exchange rate regimes . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table 1.2 Summary of regime's main characteristics . . . . . . . . . . . . . . . . . Table 1.3 Indicators for demand and growth regimes in Viet Nam . . . . . . . . . Table 1.4 Indicators for the macroeconomic policy regime . . . . . . . . . . . . . . Table 2.1 Example transactions-flow matrix . . . . . . . . . . . . . . . . . . . . . Table 2.2 Example flow of funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table 2.3 Example balance sheet (BS) . . . . . . . . . . . . . . . . . . . . . . . . . Table 2.4 Example revaluation matrix . . . . . . . . . . . . . . . . . . . . . . . . . Table 2.5 Overview of empirical models for whole countries . . . . . . . . . . . . .

Table 3 .

 3 1 Central Bank's balance sheet . . . . . . . . . . . . . . . . . . . . . . . .

Table 3 .

 3 2 Commercial banks' balance sheet . . . . . . . . . . . . . . . . . . . . . .

Table 3 .

 3 3 Banking system's simplified balance sheet . . . . . . . . . . . . . . . . .

Table 3 .

 3 4 Theoretical Balance Sheet of Viet Nam . . . . . . . . . . . . . . . . . .

Table 3 .

 3 5 Theoretical Uses-resources table + flow of funds . . . . . . . . . . . . .

Table 3 .

 3 6 Flow of funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 3 .

 3 7 Full-integration matrix . . . . . . . . . . . . . . . . . . . . . . . . . . .Table 3.8 Example of production account by activity . . . . . . . . . . . . . . . . Table 3.9 Intermediate consumptions . . . . . . . . . . . . . . . . . . . . . . . . .

Table 3 .

 3 10 Input coefficients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Table 4.1 Theoretical Balance Sheet of Viet Nam . . . . . . . . . . . . . . . . . . Table 4.2 Non-financial firms' balance sheet . . . . . . . . . . . . . . . . . . . . . Table 4.3 Households' balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . Table 4.4 Government's balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . Table 4.5 Central Bank's balance sheet . . . . . . . . . . . . . . . . . . . . . . . . Table 4.6 Commercial Banks' balance sheet . . . . . . . . . . . . . . . . . . . . . . xvii Table 4.7 Rest of the world's balance sheet . . . . . . . . . . . . . . . . . . . . . . Table 4.8 Firm's real investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . Table 4.9 Real consumption (Long-run) . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 10 Real consumption (Short-run) . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 11 Real household's investment . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 12 Real exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Table 4.13 Real imports (Long-run) . . . . . . . . . . . . . . . . . . . . . . . . . . . Table 4.14 Real imports (Short-run) . . . . . . . . . . . . . . . . . . . . . . . . . . Table 4.15 Firm's debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 16 Firm's foreign debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 17 Firm's equities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 18 Bank's foreign debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 19 Household's debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 20 Household's cash (Long-run) . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 21 Household's cash (Short-run) . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 22 International reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 23 Remittances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 24 GDP deflator (Long-run) . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 25 GDP deflator (Short-run) . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 26 Export price (Long-run) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 27 Export price (Short-run) . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 28 Import price (Long-run) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 29 Import price (Short-run) . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 30 Price of public expenditures (Long-run) . . . . . . . . . . . . . . . . . .

Table 4 .

 4 31 Price of public expenditures (Short-run) . . . . . . . . . . . . . . . . . .

Table 4 .

 4 32 Price of capital (Long-run) . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 33 Price of capital (Short-run) . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 34 Price of inventories (Long-run) . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 35 Price of inventories (Short-run) . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 36 Price of output (Long-run) . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 37 Price of output (Short-run) . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 38 Refinancing rate (Long-run) . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 39 Refinancing rate (Short-run) . . . . . . . . . . . . . . . . . . . . . . . .

	xviii

Table 4 .

 4 40 Lending rate (Long-run) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 41 Lending rate (Short-run) . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 42 Deposit rate (Long-run) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 43 Deposit rate (Short-run) . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 44 Exchange rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 45 Price of equity (Long-run) . . . . . . . . . . . . . . . . . . . . . . . . . .Table 4.46 Price of equity (Short-run) . . . . . . . . . . . . . . . . . . . . . . . . . Table 4.47 Interest rate of foreign loans (Long-run) . . . . . . . . . . . . . . . . . . Table 4.48 Interest rate of foreign loans (Short-run) . . . . . . . . . . . . . . . . . .

Table 4 .

 4 49 Rate of return of bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 50 Price of FDI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 51 Wage rate (Long-run) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 52 Wage rate (Short-run) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 53 Workers employed by firms (Long-run) . . . . . . . . . . . . . . . . . . .

Table 4 .

 4 54 Workers employed by firms (Short-run) . . . . . . . . . . . . . . . . . .

Table 4 .

 4 55 Active population . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Table 6 .

 6 1 Projections of sea level rise in the coastal regions . . . . . . . . . . . . .Table A.1 Perpetual inventory method for Firms . . . . . . . . . . . . . . . . . . . Table A.2 Perpetual inventory method for Central Bank . . . . . . . . . . . . . . . Table A.3 Perpetual inventory method for Banks . . . . . . . . . . . . . . . . . . . Table A.4 Perpetual inventory method for Government . . . . . . . . . . . . . . . Table A.5 Perpetual inventory method for Households . . . . . . . . . . . . . . . . Table A.6 Perpetual inventory method for Rest of the World . . . . . . . . . . . . Table C.1 Parameters of damage functions . . . . . . . . . . . . . . . . . . . . . .

	xix

AGR Share of agriculture's value-added out of total γ va EN ER Share of energy's value-added out of total γ va RICE Share of rice's value-added out of total agriculture γ h B Share of government bonds held by households γ b GM Share of government's dong deposits in banks γ GR Ratio of transfers from the ROW to the government to GDP

Table 1

 1

		.1: Exchange rate regimes
	Period	Regime
	1989-90	Pegged exchange rate with crawling bands
	1991-93	Pegged exchange rate within horizontal bands (de facto on USD)
	1994-96	Conventional fixed peg arrangement
	1997-98	Pegged exchange rate with crawling bands (de facto on USD)
	1999-00	Conventional fixed peg arrangement (de facto on USD)
	2001-07	Crawling peg (de facto on USD)
	2008-15	Pegged exchange rate with crawling bands

Financial balances of domestic pri- vate sector

	Table 1.2: Summary of regime's main characteristics
	Regime	Debt-led private demand	Export-led mercantilist	Weakly export-led	Domestic demand-led
	Financial balances of external sector	+	-	-/+	-/+
		-	+	+/-	+
	------of private household sector	-/ 0	+	+/-	+
	------of the corporate sector	-	+/-	+/-	-
	Growth contribution of trade balance	-	+	-/+	-/+
	-: deficit/negative contribution; + : surplus/positive contribution

Table 1

 1

	.3: Indicators for demand and growth regimes in Viet Nam
	1997-2001	2002-2011	2012-2019

Financial balances of external sector as a share of nominal GDP, per cent 2.34 5.29 -1.27 Financial balances of domestic sector as a share of nominal GDP, per cent -2.34 -5.29 1.27

	-Financial balances of public sector as a share of nominal GDP, per cent	-4.02	-6.31	-4.55
	-Financial balances of private sector as a share of nominal GDP, per cent	1.69	1.02	5.82
	--Financial balances of private household sector as a share of nominal GDP, per cent	-3	1.08	7.87
	--Financial balances of corporate sector as a share of nominal GDP, per cent	2.81	-4.52	-6.77
	--Financial balances of banking sector as a share of nominal GDP, per cent	1.88	4.47	4.71
	Real GDP growth, per cent	6.35	7.28	6.46

Growth contribution of domestic demand including stocks, percentage points

		4.67	7.83	5.25
	-Growth contribution of private consumption, percentage points	5.15	7.89	7.26
	-Growth contribution of public consumption, percentage points	0.04	0.41	0.41
	-Growth contribution of gross fixed capital formation, percentage points	2.27	2.20	0.97

Growth contribution of the balance of goods and services, percentage points 1.52 -0.86 1.09

	-Growth contribution of exports, percentage points	6.32	8.27	8.81
	-Growth contribution of imports, percentage points	-4.57	-9.74	-7.81
	Net exports of goods and services as a share of nominal GDP, per cent	-4.74	-8.94	2.63

Table 1

 1

	.4: Indicators for the macroeconomic policy regime
		1997-2001	2002-2011	2012-2019
	Monetary policy
	-Short-term real interest rate (deposit rate with three months deposits), per cent	0.96	-3.11	2.39
	-Short-term real interest rate (lending rate with less than one-year loans), per cent	6.1	0.13	5.26
	-Long-term real interest rate, per cent	6.51	0.02	4.76
	-Long-term real interest rate minus real GDP growth, percentage points	0.16	-7.26	-1.69
	Wage policy
	-Nominal unit labour costs, annual growth, per cent	2.08	15.82	5.10
	-Inflation rate (HCPI), per cent	2.49	9.66	4.12
	-Labour income share, per cent	0.30	0.31	0.39
	Fiscal policy
	-Public investment in per cent of GDP	6.06	8.03	9.34
	Open economy
	-Change in real effective exchange rate, vis-à-vis USD	0.38	0.86	3.81
	-OEC economic complexity index	-0.915	-0.55	-0.1845
	-Real exports of goods and services, per cent of GDP	40.83	73.25	112.87
	-Real imports of goods and services, per cent of GDP	42.28	78.17	117.12
	+ : expansionary stance, -: contractionary stance, 0 : neutral
	Monetary policy stance	-	+	-
	Wage policy stance	+	-/+	+
	Fiscal policy stance	+	+	+
	Open economy conditions	-	-	0

Demand regime Weakly export-led Debt-led private demand Export-led mercantilist

	The change in the macroeconomic policy regime over the period 2012-2019 has contributed
	to the shift of the debt-led private demand to the export-led regime. The monetary policy
	stance became restrictive, especially after the banking crisis in 2011. It was characterised
	by an increase in short-term and long-term interest rates. Thus, it led to lower real GDP
	growth and inflation than in the previous period. Regarding the wage policies, the nominal
	unit labour cost grew slower, inducing inflation. However, the labour income share continued
	to rise due to decreased unemployment. The expansionary fiscal policy from the high public
	investment continues to contribute to Vietnamese economic growth. The strong shift in
	the macroeconomic policy regime drove a strong increase in the REER, representing an
	appreciation of the VND and a decrease in the country's price competitiveness. The REER
	experienced substantial changes during the crisis period, such as the Asian financial crisis in
	1997, the global financial crisis in 2007-2008 and especially the Vietnamese banking crisis in
	2012-2013, a period of very high inflation. However, the appreciation of the VND could reduce
	the import price. Thus, it results in a positive contribution of trade to the growth, current
	account surpluses and external sector deficits associated with this export-led mercantilist
	regime.

Stock-flow consistent modelling literature 2.1 Introduction

	Chapter 2
	As mentioned in the previous chapter, our study aims to contribute to macroeconomic
	, accounting-based modelling in Viet Nam. Government institutions, research institutes and universities are
	macroeconomic models can anticipate the credit crisis and economic recession. SFC models using different types of macroeconomic models for modelling the Vietnamese economy and
	bring real and financial variables together in the same framework and are therefore best suited forecasting as well as policy analysis. Government institutions include the Ministry of Plan
	to address the challenges facing Viet Nam. Our study makes two main contributions to the and Investment (MPI) with institutes such as the GSO, the Central Institute of Economic
	literature. Firstly, as far as we know, we are the first to develop an empirical SFC model of Management (CIEM), the National Center for socio-economic Information and Forecast
	the Vietnamese economy. Secondly, we contribute to the scarce literature on empirical SFC (NCIF); the Ministry of Finance (MOF) and the SBV.
	models for developing countries. To do so, the next chapter (Chapter 2) will introduce the
	SFC approach and the related literature. GSO uses input-output and regression-based econometric models to analyse and forecast
	indicators such as GDP, income and expenditures. CIEM has developed an annual macro-
	econometric model with the support of the German Development Agency (GIZ) to provide
	annual forecasts on GDP, investment, consumption and inflation. CGE -an accounting-based
	macroeconomic modelling approach is also developed at CIEM to deal with different research
	questions for the Vietnamese economy

Table 2

 2

		.1: Example transactions-flow matrix
		Firms	Banks Government Households Total
		Current Capital
	Wages	-W B		W B	0
	Taxes	-T	T		0
	Consumption	+C		-C	0
	Investment	-I	I		0
	Interest on Deposits		-DM	DM	0
	Interest on Loans	-L	L		0
	Interest on Bonds		-B	B	0
	Interest on Equity	-p E E		p E E	0

Net financing capacity NFC f NFC b NFC g NFC h 0

Table 2

 2

	NFC g	NFC h	0

.2: Example flow of funds Firms Banks Government Households Total Net financing capacity NFC f NFC b

Table 2

 2

.3: Example balance sheet (BS)

Table 2

 2

.4: Example revaluation matrix

Table 3

 3

.1: Central Bank's balance sheet

Table 3 .

 3 2: Commercial banks' balance sheet

	Assets	Liabilities
	Domestic credit to private sector (L P B )	Domestic credit from Central bank to banks (L B CB )
	Foreign reserves in commercial banks (R B )	Time deposits (T )
	Commercial bank deposits in Central bank (D CB B )

Table 3 .

 3

3: Banking system's simplified balance sheet

Table 3 .

 3 4: Theoretical Balance Sheet of Viet Nam

		Firms	Central Bank	Banks	Government Households	RoW	Total
	Non-financial assets	p

Table 3 .

 3 5: Theoretical Uses-resources table + flow of funds

	Firms	Central Bank	Banks	Government	Households	RoW	Total

Table 3

 3

			.6: Flow of funds
		Firms	Central Bank	Banks	Government Households	RoW	Total
	Net fin. capacity	NFC f	0	NFC b	NFC g	NFC h	NFC r	0
	∆ val. in Intl. reserves		-∆RES us xr				∆RES us xr	0
	∆ val. in Cash		∆H			-∆H		0
	∆ val. in Bank's Reserves		∆M B cb	-∆M B cb				0
	∆ val. in Gov's Deposits		∆GM cb	∆GM b	-∆GM			0
	∆ val. in Dong Deposits	-∆DM f		∆DM		-∆DM h		0
	∆ val. in Foreign deposits	-∆F M f us xr			-∆F M g us xr -∆F M h us xr	∆F M us xr	0
	∆ val. in Bonds		∆B cb	∆B b	∆B	∆B h		0
	∆ val. in Advances		-∆LB cb	∆LB cb				0
	∆ val. in Loans	∆L f		-∆L		∆L h		0
	∆ val. in Foreign loans	∆F L f us xr		∆F L b us xr	∆F L g us xr		-∆F L us xr	0
	∆ val. in Equity	p E ∆E f		p E ∆E b		-p E ∆E h	-p E ∆E r	0
	∆ val. in FDI	p

F DI ∆F DI us xr -p F DI ∆F DI us xr 0 ∆ val. in Other accounts r/p (**)

Table 3 .

 3 7: Full-integration matrix

			Firms	Central Bank	Banks	Government Households	RoW	Total
		Previous net wealth	NW f t-1	NW cb t-1	NW b t-1	NW g t-1	NW h	NW r t-1	pK t-1 kt-1
		Non-financial assets	pK∆k f			pK∆k g	pK∆k h		pK∆k
		Inventories	pK 12 ∆k12						pK 12 ∆k12
		Intl. reserves		-∆RESusxr				∆RESusxr	0
		Cash		∆H			-∆H		0
		Bank's Reserves		∆M B cb	-∆M B cb				0
		Gov's Deposits		∆GM cb	∆GM b	-∆GM			0
		Dong Deposits	-∆DM f		∆DM		-∆DM h		0
	Changes in assets from transactions	Foreign deposits	-∆F M f us xr			-∆F M g us xr -∆F M h us xr	∆F Musxr	0
		Bonds		∆B cb	∆B b	∆B	∆B h		0
		Advances		-∆LB cb	∆LB cb				0
		Loans	∆L f		-∆L		∆L h		0
		Foreign loans	∆F L f us xr		∆F L b us xr	∆F L g us xr		-∆F Lusxr	0
		Equity	pE∆E f		pE∆E b		-pE∆E h	-pE∆E r	0
		FDI	pFDI∆F DIusxr					-pFDI∆F DIusxr	0
		Other accounts r/p	∆OT A f

Table 3 .

 3 8: Example of production account by activity

	Agriculture	Energy	Industry Fin. services Pub. services Non-fin. services Total

Table 3

 3

.9) is a "sector-by-sector" table. It shows the flows of intermediate goods between sectors. The "sector" in our model represents the type of goods and services produced by the producers, which can be the private sectors (firms, banks, households) or the government.

Table 3

 3

			.9: Intermediate consumptions
		Agriculture Energy Industry Fin. services Pub. services Non-fin. services
		(1)	(2)	(3)	(4)	(5)	(6)
	Agriculture (1)	IC 11	IC 12	IC 13	IC 14	IC 15	IC 16
	Energy (2)	IC 21	IC 22	IC 23	IC 24	IC 25	IC 26
	Industry (3)	IC 31	IC 32	IC 33	IC 34	IC 35	IC 36
	Fin. services (4)	IC 41	IC 42	IC 43	IC 44	IC 45	IC 46
	Pub. services (5)	IC 51	IC 52	IC 53	IC 54	IC 55	IC 56
	Non-fin. services (6)	IC 61	IC 62	IC 63	IC 64	IC 65	IC 66

Table 3

 3

				.10: Input coefficients
		Agriculture Energy Industry Fin. services Pub. services Non-fin. services
		(1)	(2)	(3)	(4)	(5)	(6)
	Agriculture (1)	a 11	a 12	a 13	a 14	a 15	a 16
	Energy (2)	a 21	a 22	a 23	a 24	a 25	a 26
	Industry (3)	a 31	a 32	a 33	a 34	a 35	a 36
	Fin. services (4)	a 41	a 42	a 43	a 44	a 45	a 46
	Pub. services (5)	a 51	a 52	a 53	a 54	a 55	a 56
	Non-fin. services (6)	a 61	a 62	a 63	a 64	a 65	a 66
	3.4

Dynamics of sectoral financial balances and wealth accumulation 3.4.1 Sectoral financial balances

Table 4

 4

	.2: Non-financial firms' balance sheet
		Assets	Liabilities
		(+)	(-)
	Non-financial assets	p K k f
	Inventories	p K 12 k 12
	Dong Deposits	DM f
	Foreign deposits	F M f us xr
	Loans		L f
	Foreign loans		F L f us xr
	Equity		p E E f
	Foreign direct investment		p F DI F DI us xr (*)
	Other accounts r/p	OT A f
	Net Wealth		NW f

(*) Item closes the sector's account

Table 4

 4

	.4: Government's balance sheet
		Assets	Liabilities
		(+)	(-)
	Non-financial assets	p K k g
	Governments's Deposits	GM
	Foreign Deposits	F M g us xr
	Bonds		B (*)
	Foreign loans		F L g us xr (*)
	Other accounts r/p	OT A g
	Net Wealth		NW g

(*) Item closes the sector's account

Table 4

 4

	.5: Central Bank's balance sheet
		Assets	Liabilities
		(+)	(-)
	Intl. reserves	RES cb us xr
	Cash		H
	Bank's Reserves		M B cb
	Government's Deposits		GM cb
	Bonds	B cb(*)
	Advances	LB cb
	Other accounts r/p	OT A cb
	Net Wealth		NW cb

(*) Item closes the sector's account

Table 4

 4

	.6: Commercial Banks' balance sheet
		Assets	Liabilities
		(+)	(-)
	Bank's Reserves	M B cb
	Governments's Deposits		GM b
	Dong Deposits		DM
	Bonds	B b
	Advances		LB cb(*)
	Loans	L
	Foreign loans		F L b us xr
	Equity		p E E b
	Other accounts r/p	OT A b
	Net Wealth		NW b
	(*) Item closes the sector's account

Table 4

 4

	.7: Rest of the world's balance sheet
		Assets	Liabilities
		(+)	(-)
	Intl. reserves		RES us xr
	Foreign Deposits		F M us xr
	Foreign loans	F L us xr
	Equity	p E E r

Table 4 .

 4 10: Real consumption (Short-run)

	Dependent variable:
	∆ln(c)

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 12: Real exports

	Dependent variable: ∆ln(x)

* p<0.1; * * p<0.05; * * * p<0.01 Table

Table 4 .

 4 13: Real imports (Long-run)

	Dependent variable:
	ln(im)

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 14: Real imports (Short-run)

	Dependent variable:
	∆ln(im)

* p<0.1; * * p<0.05; * * * p<0.01

Table 4

 4

		.17: Firm's equities
		Dependent variable:
		∆E f
	τ ef 1	-0.300 * *
		(0.121)
	τ ef 2	0.662 * * *
		(0.144)
	τ ef 3	13.608 * *
		(6.178)
	τ ef 0	-229.164 * *
		(87.788)
	Observations	22
	R 2	0.871
	Adjusted R 2	0.792
	Residual Std. Error	60.326 (df = 13)
	F Statistic	10.965 * * * (df = 8; 13)
	Note:

* p<0.1; * * p<0.05; * * * p<0.01 Table

Table 4

 4

	.20: Household's cash (Long-run)
		Dependent variable:
		ln(H)
	δ h 1	1.185 * * *
		(0.041)
	δ h 2	-0.209 *
		(0.121)
	δ h 0	-2.251 * * *
		(0.379)
	Observations	23
	R 2	0.977
	Adjusted R 2	0.975
	Residual Std. Error	0.191 (df = 20)
	F Statistic	430.208 * * * (df = 2; 20)
	Note:

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 21: Household's cash(Short-run)

	Dependent variable:
	∆ln(H)

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4

	Dependent variable:
	ln(p Y )

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 25: GDP deflator (Short-run)

	Dependent variable:
	∆ln(p Y )

* p<0.1; * * p<0.05; * * * p<0.01

Table 4

 4

	.26: Export price (Long-run)
		Dependent variable:
		ln(p X )
	µ px 1	0.638 * * *
		(0.064)
	µ px 2	0.270 *
		(0.139)
	Observations	23
	R 2	0.962
	Adjusted R 2	0.958
	Residual Std. Error	0.098 (df = 21)
	F Statistic	265.954 * * * (df = 2; 21)
	Note:

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 27: Export price (Short-run)

	Dependent variable:
	∆ln(p X )

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 27 shows the short-run specification of the export price. The growth rate of the price of exports is determined by its previous one-period lagged values. An increase of 1% in the growth rate of export price in the previous period implies a 0.42% increase in the growth rate of the export price one period later. The speed of adjustment to the long-run trajectory is 24.5% annually.

	Price of imports (EQ.B.16)
	ln(p IMt ) = ν pim 1 (+)	* ln(xr t-1 ) + ν pim 2 (+)	* ln(p * IM t-1 )	(EQ.B.16.1)

Table 4

 4

	.28: Import price (Long-run)
		Dependent variable:
		ln(p IM )
	ν pim 1	0.007
		(0.004)
	ν pim 2	1.813 * * *
		(0.175)
	Observations	23
	R 2	0.874
	Adjusted R 2	0.862
	Residual Std. Error	0.156 (df = 21)
	F Statistic	72.579 * * * (df = 2; 21)
	Note:

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 29: Import price (Short-run)

	Dependent variable:
	∆ln(p IM )

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 30: Price of public expenditures (Long-run)

	Dependent variable:
	ln(p G )

Table 4 .

 4 31: Price of public expenditures (Short-run)

	Dependent variable:
	∆ln(p G )

Table 4 .

 4 32: Price of capital(Long-run)

	Dependent variable:
	ln(p K )

Table 4 .

 4 33: Price of capital(Short-run)

	Dependent variable:
	∆ln(p K )

Table 4 .

 4 34: Price of inventories(Long-run)

	Dependent variable:
	ln(p IN V )

* p<0.1; * * p<0.05; * * * p<0.01 ∆ln(p IN Vt

Table 4 .

 4 35: Price of inventories(Short-run)

	Dependent variable:
	∆ln(p IN V )

Table 4 .

 4 36: Price of output(Long-run)

	Dependent variable:
	ln(p Q )

Table 4 .

 4 37: Price of output(Short-run)

	Dependent variable:
	∆ln(p Q )

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 38: Refinancing rate (Long-run)

	Dependent variable:
	ln(r cb l )

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 39: Refinancing rate (Short-run)

	Dependent variable:
	∆ln(r cb l )

* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 39 shows the short-run specification of the refinancing rate announced by the central bank. As expected, this growth rate of the serie depends positively on the interest rate differential (i.e. the difference between the US's interest rate and the refinancing rate) of the previous period. When the US raise their interest rate, the Vietnamese central bank will also increase the refinancing rate. The change in the exchange rate will positively affect the refinancing rate. A 1% depreciation of the Viet Nam dong will lead to a 1.8% increase in the refinancing rate. The annual speed of adjustment is 26%.

	Lending rate (EQ.B.22)
	ln(r lt ) = ̟ rl 0 + ̟ rl (+) 1	* ln(r cb lt )	(EQ.B.22.1)

Table 4

 4

	.40: Lending rate (Long-run)
		Dependent variable:
		ln(r l )
	̟ rl 1	0.785 * * *
		(0.134)
	̟ rl 0	0.802 * * *
		(0.272)
	Observations	24
	R 2	0.607
	Adjusted R 2	0.590
	Residual Std. Error	0.187 (df = 22)
	F Statistic	34.045 * * * (df = 1; 22)

Table 4

 4

	.42: Deposit rate (Long-run)
		Dependent variable:
		ln(r m )
	ω rm 0	0.967 * * *
		(0.026)
	Observations	24
	R 2	0.983
	Adjusted R 2	0.982
	Residual Std. Error	0.262 (df = 23)
	F Statistic	1,333.635 * * * (df = 1; 23)
	Note:	* p<0.1; * * p<0.05; * * * p<0.01
	The same specification is applied to the deposit rate. In the long-run, commercial banks will
	adjust the level of the deposit rate when the central bank changes the refinancing rate. An
	increase of 0.97% in the deposit rate is in response to a 1% increase in the refinancing rate.

Table 4

 4 The short-run specification results shown in Table4.46 indicate that the growth rate of equity price is positively affected by itself one period later. In addition, following a 1% increase in the growth rate of the refinancing rate provokes a 0.2% rise in the price of equity in the same period. Finally, the annual speed of adjustment is about 60%.

	.45: Price of equity (Long-run)
		Dependent variable:
		ln(p E )
	ς pe 1	0.884 * * *
		(0.136)
	ς pe 0	-0.237 * * *
		(0.069)
	Observations	24
	R 2	0.659
	Adjusted R 2	0.643
	Residual Std. Error	0.338 (df = 22)
	F Statistic	42.468 * * * (df = 1; 22)
	Note:	* p<0.1; * * p<0.05; * * * p<0.01
	The price of equity is supposed to depend on the leader equity price, which is represented by
	the US's equity price. Following a 1% increase in the US's equity price causes a further 0.8%
	rise in the Vietnamese price of equity.

Table 4 .

 4 47: Interest rate of foreign loans (Long-run)

	Dependent variable:
	ln(r f l )

Table 4 .

 4 48: Interest rate of foreign loans (Short-run)The specification for the short-run evolution of the interest rate of foreign loans is shown in Table 4.48. It indicates the positive effect of the change in the US interest rate on the change in the interest rate of foreign loans. The speed of adjustment is relatively high (34% per year).

	Dependent variable:
	∆ln(r f l )

Table 4 .

 4 49: Rate of return of bonds

	Dependent variable:
	ln(r b )

Table 4

 4

		.50: Price of FDI
		Dependent variable:
		ln(p F DI )
	ϑ pf di 0	0.461 * * *
		(0.052)
	ϑ pf di 1	0.016 * * *
		(0.003)
	Observations	23
	R 2	0.906
	Adjusted R 2	0.865
	Residual Std. Error	0.108 (df = 16)
	F Statistic	22.095 * * * (df = 7; 16)
	Note:	* p<0.1; * * p<0.05; * * * p<0.01

Table 4 .

 4 51: Wage rate (Long-run)

	Dependent variable:
	ln(wr)

Table 4 .

 4 52: Wage rate (Short-run)In the short-run, represented as the growth rate of the wage rate, it confirms the positive effect of the consumer price and labour productivity on the wage rate. Especially, the speed of adjustment to come back to the long-run pathway is 63% annually.

	Dependent variable:
	∆ln(wr)

Table 4

 4

	.53: Workers employed by firms (Long-run)
		Dependent variable:
		ln(N BW f )
	λ 1	0.387 * * *
		(0.015)
	λ 2	0.672 * * *
		(0.006)
	Observations	24
	R 2	1.000
	Adjusted R 2	1.000
	Residual Std. Error	0.036 (df = 22)
	F Statistic	2,001,308.000 * * * (df = 2; 22)
	Note:	* p<0.1; * * p<0.05; * * * p<0.01
	The estimation output (Table 4.55) demonstrates that the number of workers employed
	depends positively on the value-added (labour demand) and the active population (labour
	supply).

Table 4 .

 4 54: Workers employed by firms (Short-run)

	Dependent variable:
	∆ln(N BW f )

  Nowadays, in the context of financial globalisation and important cross-border capital flows, the US monetary policy can have important financial spillovers to emerging markets. As the FED's interest rate rises, those who invest in emerging markets to seek high rates of return may turn to investing in the US market. It can lead to massive capital inflows to the US and outflows from the emerging world. It can also result in an appreciation of the US dollar and negatively impact the balance sheet with liabilities denominated in the US dollar. Thus, Nier et al. (2014) demonstrated that when the foreign interest rate increases, the interest rate differentials have a statistically significant effect on the amount of capital account, forcing developing economies to raise interest rates in order to curb capital outflows. This foreign shock aptly illustrates the recent US restrictive monetary policy in order to curb domestic inflation. It will hit hard the developing and emerging economies.

  Table A.1: Perpetual inventory method for Firms Inventories p K 12 -1 k 12 -1 p K 12 i 12 k 12 -1 ∆p K 12 p K 12 k 12 Foreign direct investment p F DI -1 F DI us-1 xr -1 p F DI ∆F DI us xr F DI us-1 xr -1 ∆p F DI p F DI F DI us xr +F DI us-1 p F DI -1 ∆xr Intl. reserves RES us -1 xr -1 ∆RES us xr RES us -1 ∆xr RES us xr

	Table A.2: Perpetual inventory method for Central Bank
			Stock t-1	F lows	Revaluation Stock t
	Cash		H -1	∆H		H
	Bank's Reserves		M B cb -1	∆M B cb		M B cb
	Governments's Deposits GM cb -1	∆GM cb		GM cb
	Bonds		B cb -1	∆B cb		B cb
	Advances		LB cb -1	∆LB cb		LB cb
	Other accounts r/p*	OT A cb -1	∆OT A cb		OT A cb
	Net Wealth		NW cb -1	0	REVAL cb	NW cb
		Stock t-1	F lows	Revaluation	Stock t
	Non-financial assets	p K -1 k f -1		p K i f	k f -1 ∆p K	p K k f
	Dong Deposits	DM f -1		∆DM f		DM f
	Foreign deposits	F M f us-1 xr -1	∆F M f us xr	F M f us-1 ∆xr	F M f us xr
	Loans	L f -1		∆L f		L f
	Foreign loans	F L f us-1 xr -1 Table A.3: Perpetual inventory method for Banks ∆F L f us xr F L f us-1 ∆xr	F L f us xr
	Equity	p E -1 E f -1		p E ∆E f	E f -1 ∆p E	p E E f
			Stock t-1	F lows	Revaluation Stock t
	Bank's Reserves	M B cb -1	∆M B cb		M B cb
	Other accounts r/p*	OT A f -1		∆OT A f		OT A f
	Net Wealth	NW f -1		NLP f	REVAL f	NW f

NLP h REVAL h NW h

  Table A.4: Perpetual inventory method for Government Table A.5: Perpetual inventory method for Households Table A.6: Perpetual inventory method for Rest of the World Foreign direct investment p F DI -1 F DI us-1 xr -1 p F DI ∆F DI us xr F DI us-1 xr -1 ∆p F DI p F DI F DI us xr +F DI us-1 p F DI -1 ∆xr

			Stock t-1	F lows	Revaluation Stock t
	Non-financial assets	p K -1 k g -1	p K i g	k g -1 ∆p K	p K k g
	Governments's Deposits GM -1	∆GM		-GM
	Foreign deposits		F M g us -1 xr -1 ∆F M g us xr F M g us -1 ∆xr F M g us xr
	Bonds		B -1	∆B		B
	Foreign loans		F L g us -1 xr -1 ∆F L g us xr F L g us -1 ∆xr	F L g us xr
	Other accounts r/p*	OT A g -1	∆OT A g		OT A g
	Net Wealth		NW g -1	NLP g	REVAL g	NW g
			Stock t-1	F lows	Revaluation Stock t
	Non-financial assets p K -1 k h -1	p K i h	k h -1 ∆p K	p K k h
	Cash		H -1	∆H		H
	Dong Deposits		DM h -1	∆DM h		DM h
	Foreign deposits	F M h us -1 xr -1 ∆F M h us xr F M h us -1 ∆xr F M h us xr
	Bonds		B h -1	∆B h		p B B h
	Loans		L h -1	∆L h		L h
	Equity		p E -1 E h -1	p E ∆E h	E h -1 ∆p E	p E E h
	Other accounts r/p* OT A h -1	∆OT A h		OT A h
	Net Wealth		NW h -1
		Stock t-1	F lows	Revaluation	Stock t
	Intl. reserves	RES cb us-1 xr -1	∆RES cb us xr	RES cb us-1 ∆xr	RES cb us xr
	Foreign deposits	F M us-1 xr -1	∆F M us xr	F M us-1 ∆xr	F M us xr
	Foreign loans	F L us-1 xr -1	∆F L us xr	F L us-1 ∆xr	F L us xr
	Equity	p E -1 E r -1		p E ∆E r	E r -1 ∆p E	p E E r
	Other accounts r/p*	OT A r -1		∆OT A r		OT A r
	Net Wealth	NW r -1		NLP r	REVAL r	NW r

This section is an updated version of a chapter, co-authored with Etienne ESPAGNE, in the book "Rethinking Asian Capitalism. The Achievements and Challenges of Vietnam under Doi Moi" (Tran, T.A-D. (Ed.), 2022).

Acknowledgments

Words cannot express how thankful I am. I would not have been able to complete my PhD thesis without the support of my supervisors, advisors, mentors, friends and family. First, I would like to express my sincere gratitude to my supervisors, TRAN Thi Anh-Dao and NGUYEN Manh-Hung, who brought me to this challenging PhD research journey, for the constant help received. I thank the French Embassy in Viet Nam for providing me with the Excellence scholarship to study in France for three years and the GEMMES Viet Nam project for funding the last year of my PhD. I am greatly indebted to Etienne Espagne, who always believes in me, for his support, advice and encouragement throughout my PhD. I am also very grateful to Luis Reyes for their support, technical guidance and inspiration. I have been very lucky to receive support from many people and have had the opportunity to work and discuss with many other great minds. I would like to thank Jacques Mazier, Arsene Rieber and Jean-Louis Brillet for the advice. A thank goes to Antoine Godin, other members of the GEMMES team at the French Development Agency (AFD) and all the participants of international conferences/workshops where I presented my work for their valuable comments The authors analysed the impact of a downturn in the income of destination countries of Moldova's migrants. The result simulations show the relevance of external shocks on household consumption and investment, with remittances being a major transmission channel. Raza et al. (2019) develop a SFC model of Iceland to assess the role of the volatility of capital inflows for a small country with its own currency. The authors build on previous theoretical models for a small open economy already available in the literature. The model assumes explicitly that domestic banks also have foreign branches which attract foreign deposits. The authors use the model to simulate the consequences of a sudden stop in foreign lending and study the implications of introducing capital controls.

Nalin and Yajima (2020) built a SFC model, following the OPENFLEX model proposed by Godley and Lavoie (2007b), to empirically explore the balance sheet implications from

List of Abbreviations

Introduction

As mentioned in General introduction, the ultimate goal of this thesis is to understand the macroeconomic interactions of different sectors in the Vietnamese economy under globalisation and, thereby, to build an empirical SFC model intended for scenario analysis and policy simulations. Chapter 1 described the main features and macroeconomic dynamics of the Vietnamese economy since the crucial reform in 1986. Chapter 2 introduces the SFC methodology of macroeconomic modelling and the procedure for developing an empirical SFC model. Then, in this chapter, we will present our empirical SFC macroeconomic model based on the accounting structure developed in Chapter 3.

The aim of this model is twofold. First, the model provides a theory-consistent representation of the general structure of the Viet Nam economy. Second, it offers policy/scenario simulation capabilities to the needs of policymakers. It constitutes a means of evaluating the impact/feedback effects of different policies or shocks on the Vietnamese economy. As shown in Chapter 2, to the best of our knowledge, we are the first to develop an empirical SFC model of the Vietnamese economy. It would expand the literature on empirically grounded SFC macro-modelling.

The modelling procedure has sought to account for the structure of Viet Nam's economy, the availability of data, the accounting structure and the degree of stability of time-series estimates of parameters during the country's transition process. The present model seeks to provide a mechanism to link policies and an easy and adaptable means of simulating the interrelationships between macroeconomic variables. We believe that no one theory or dynamic specification can provide a complete description of the Vietnamese economy. What is essential is that key features of the economic and financial process are represented in

Labour market

The wage rate growth depends on the unemployment rate and the growth of the consumption price, and that of labour productivity, which is proxied by the ratio of the real GDP to the total number of workers.

Unit labour cost is supposed to be determined as the ratio between the sum of the wage bill and social contribution and the real output.

There is a positive impact from demand, i.e. the number of workers employed by firms. The higher the level of a firm's value-added, the higher the demand for workers.

Suppose that the total number of workers is split among different institutional sectors using fixed shares. The total number of workers is calculated by:

Bloom (1986) examines, on the supply side of the labour market, the lagged effect of population growth on the labour supply.

The total population is assumed to grow at an exogenous rate.

Chapter 5

Policy responses and model simulation This chapter is a first attempt to assess the country's ability to conduct macroeconomic policies and to face global external shocks such as the COVID-19 pandemic, given its deep integration into the global economy. To do this, we present some simulation exercises aimed at examining the potential impacts of policy shocks on Vietnamese macroeconomic variables.

As mentioned in Chapter 1, the macroeconomic policies include monetary policy, fiscal policy, wage policy and policy related to the open economy. We will run three distinct policy shocks.

A standard fiscal shock via an increase in public spending and a monetary shock via an increase in the refinancing rate will proceed. The third shock related to the monetary policy of the US is especially relevant in the actual context of the world economy.

Facing the current situation of high inflation in the US, since March 2022, the Federal Reserve (FED) has raised the interest rate. This action brings a lot of risks of a global recession and negatively affects several developing countries (IMF, 2022). This also implies an increase in the Vietnamese interest rate in September since the US interest rate has exceeded the limit of 2.5% (Figure 5.1). We will analyse the effects of this shock on the economy. It will show that external shocks can significantly impact the domestic economy in the context of the evolution of financial and economic globalisation.

Then, in the second part of this chapter, it develops an application of the model to perform a detailed analysis of the government policy responses, which simultaneously combine monetary and fiscal policies, to the COVID-19 pandemic.

Chapter 6

Macroeconomic impacts of climate change 1 scenarios and all periods. In contrast, an increase in yield by 2.07 to 6.66 % is expected in the summer season for the 2020s and 2050s, relative to baseline yield.

Introduction

We assume that a given change in rice output results in a proportional change in the value of that agricultural sector's gross output in the baseline scenario. We do not consider possible endogenous adaptation strategies at this stage and estimate an upper threshold for the corresponding damage function. However, we may also underestimate damage since non-linear tipping points of the climate system are not accounted for, even if we complete this assessment by taking sea-level rise into account in the case of rice.

We performed a meta-analysis (random effects model) of the regression results to derive an

The same convention holds for households.

Government

Expected gross Damage (GD e ) on the whole economy depends on the economic growth rate (g) and temperature change (∆T ). Thus, the level of adaptation investment of the government is given by:

(EQ.AD.12)

We assume a declining marginal increase in protection in line with the literature (de Bruin, Dellink, and Tol 2009, World Bank 2021). The protection function is defined by the level of total adaptation capital k A .

where γ T represents that the higher ∆T , the more difficult it is to adapt and protect.

Assume that the protection function is homogenous for all damages → residual damage (RD j )

where j denotes agriculture, energy, labour productivity, mortality, and TFP.

Simulation

As mentioned above, we aim to analyse the adaptation measures in the context of a greener industrialisation process for Viet Nam. Net-zero emissions require profound structural change and will demand substantial new investments in green technologies, sustainable infrastructure and increased resource productivity. Thus, it will raise the financing needs of the economy.

General conclusion

Main findings and achievements

Economic and financial globalisation offer great opportunities for developing countries like Viet Nam to grow faster. Viet Nam, one of the most open to the world, has achieved remarkable economic development successes since the reform in 1986. Behind this successful story, international trade has been considered one of the key drivers. However, participation in globalisation has also increased interdependence among countries, increasing the risks of economic instability and environmental degradation. Hence, the ultimate goal of this thesis is to understand the macroeconomic interactions of different sectors in the Vietnamese economy under globalisation and, thereby, to build an empirical SFC model intended for scenario analysis and policy simulations.

In Chapter 1, the Post-Keynesian approach allows us to understand the main features, dynamics and interaction between domestic features of the Vietnamese economy and its external features. The economy still relies on the external sector. Indeed, the export-led growth model must focus on developing the national/domestic productive capacity. The trade depends mainly on foreign multinational corporations, FDI firms and joint venture companies.

SFC models bring real and financial variables together in the same framework and are therefore best suited to address the challenges facing Viet Nam. As far as we know, we are the first to develop an empirical SFC model of the Vietnamese economy and contribute to the macroeconomic modelling literature of Viet Nam. In addition, despite a growing interest in empirical SFC models for whole countries, there were few models for developing countries. Our

Limitations and further research

We are aware that this type of model used for policy simulation still needs continuous improvements. We identify two main types of areas which will need to be addressed: technical and theoretical considerations.

Regarding technical considerations, updating data will need to be performed to reflect the economy's dynamics correctly. So far, it is very difficult to find detailed financial data for all types of financial instruments in the economy. However, with the rapid development of the financial sector and the rapid digital transformation process in Viet Nam, more series could be available and allow to have accounting matrices which are close to the reality as much as possible. More sophisticated econometric methods can be used to estimate behavioural equations.

Regarding theoretical considerations, the model is, by definition, a simplification and aggregates away many additional details about the Vietnamese economy. There are a number of areas where the analyses based on the model could be expanded, such as production and distribution of income.

Firstly, the actual model focuses on the aggregate effects of production with the integration of a simplified Input-Output matrix in the model. However, we can develop an unconsolidated formulation of the production process, which would be helpful in analysing intra-firm dynamics.

Given the strong interdependencies between industries, Input-output analysis is indispensable to analyse the transactions that take place within the production sectors in a complete system.

It allows for the study of the structural change of the economy toward a greener growth.

The input-output analysis allows having different levels of productivity in various sectors. It potentially identifies industries playing the role of the main drivers of production, relevant in terms of value-added. Other sectors can have an important impact on the labour market. The dependency on the rest of the world will also be analysed through the export/import share of each sector. Especially climate change leads to a tightening of Vietnam's external constraint, meaning that adjustments in patterns of international trade can worsen the burden of climate impacts [START_REF] Mania | Two sides of the same coin? Viet Nam's macro resilience under trade-led growth[END_REF].

Secondly, assessing the impacts of climate change should be further developed by disaggregating production capacities. As mentioned in Chapter 6, multiple known sectors of the Vietnamese economy have been omitted. Our perspective will be to complete the work by designing the Gemmes-VN architecture with multi-sector modelling. In fact, treatment of the supply side needs to be improved.

Lastly, income distribution is one of the core issues in economic policy analysis. The actual model allows only to analyse the functional income distribution, which means the distribution of income among the factors of production (labour, capital). It consists of the factor shares at the macro level. An extension of the model can be the integration of the personal income distribution, i.e. the distribution among the groups of the society [START_REF] Dafermos | Linking functional with personal income distribution: a stock-flow consistent approach[END_REF]. It consists of the integration of various household groups that receive income. The dynamic linkage between functional and personal income distribution is formulated as part of a complete macroeconomic system. Inequality simulation exercises can be conducted and potentially contribute to providing important policy recommendations with the long-term goal of reducing inequalities and improving well-being.

C Parameters