Global Trade Cycle and Financial Cycle in Vietnam Economy

The paper investigates the jointly dynamics of international trade cycle and financial cycle in the Vietnam economy. The data is a time-series sample of Vietnam economy over the 1995-2021 time period. And the research objective is to analyze the co-movement of foreign trade and financial cycle, incorporating the recent Covid-19 pandemic. Methodology: The research methodology combines both qualitative analysis with quantitative one. In particular, the qualitative analysis reviews the recent literature on the global trade and financial cycle, with a focal point on the developing economies. Then, the quantitative analysis considers the time-series analysis of Vietnam economy, as one typical small open economy. Findings: The global trade and financial cycle are considered as a central role within the current international monetary system. The trade cycle can be effective in the short and medium term while the financial cyle exists for a longer term. In the Vietnam economy, the trade and financial cycle co-moves closedly, especially during the time period of structural break such as Covid-19 pandemic. Implications: The results uncover that the public policy needs to be adjusted according to the points in the global trade and financial cyle. The policy at the peak of cycle can be tightened while the policy at the trough of cycle needs to be expanded. And the policy at both the peak and trough needs to be accompanied with an excellent communication to the whole economy.