Globalization, Economic Reform, and Structural Price Transmission: Sam Decomposition Techniques with an Empirical Application to Vietnam

Abstract

Globalization poses special challenges for economies in transition, particularly those which have been slow to reform systems of administered prices. Such allocation mechanisms now encounter significant friction from external market forces, and it is vital for policymakers to better anticipate the incidence of external price transmission. In this paper, we propose a novel variation of multiplier decomposition methods; make use of an up-to-date social accounting matrix (SAM) for Vietnam; and demonstrate how this kind of information can help identify adverse incentive and wealth effects that might undermine reform and structural adjustments efforts in this important emerging Asian economy.