Macroeconomic dynamics in China, Laos and Vietnam: a VAR analysis

The surprising resilience of current communist states towards democratic opening and a mainstream neoliberal economic 'way-of-life' in the past did not hamper their economic performances and development perspectives as much as we would expect. In the countries that are one-party states, in which the institutions of the ruling party and the state have become intertwined, ostensibly arguing for political and economic equality, still maintaining a firm control over the economic resources, we could expect economic relationships that are au contraire modern economic trends. However, China for example, a supposedly communist economy, with its breath-taking socio-economic progress, elusively ignores mainstream economic vocation, progressively advancing towards establishing itself as a sacrosanct economic force. In that manner, the goal of this paper is to (1) evaluate the dynamics of relevant macroeconomic variables in three current communist states (China, Laos and Vietnam) in order to (2) expose possible deviations to modern capitalist trends as well as to (3) provide relevant information that can serve as a guideline for macro policies. For that purpose, we analyzed the relationship between the GDP, price, money and the exchange rate by using VAR modeling. Results revealed coherent macroeconomic dynamics with a causality that is in accordance to a common capitalist economic framework.