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Abstract
The global financial crisis in 2008-2009 has affected almost all countries.
Vietnam was hit by a large fall in export demand and foreign direct investment.
Many governments quickly prescribed stimulus packages and Vietnam was no
exception. It reduced taxes and increased government spending, mainly by
subsidizing loans to state-owned enterprises. The question is what the
stimulated impact is, if any, and whether a better outcome could have been
achieved by a different mix of policies. In this paper, we use a simple general
equilibrium model to quantify the impact of the various components of the
stimulus package on the whole economy as well as agricultural sector. The
results suggest that, in the short run at least, the stimulus package marginally
stabilised national production and income. The package led to a reduction in
total welfare because it favoured the non-agricultural sector. The poor in the
agricultural sector could be better off if the investment policy were to boost
demand for agricultural products. Furthermore, the risk of inflation and real
exchange rate appreciation could undermine national competitiveness.