Nonlinear Effects of Inflation and Wage Policy on Firm Sustainable Growth in Vietnam

This study examines the effects of consumer price index (CPI) and regional minimum wagepolicy on firms’ sustainable growth from both economic and social perspectives. Using a balancedpanel of 146 agricultural and manufacturing firms in Vietnam over 2011–2022 (1,752 firm-yearobservations), the analysis employs panel data regression models to estimate both linear andnonlinear effects. The results reveal clear evidence of inverted U-shaped relationships between CPIand the economic aspect of firm sustainable growth, indicating that moderate inflation promotesgrowth while excessive inflation constrains it. For the social aspect—measured by employees’income growth, minimum wage policy show positive effects within certain thresholds, but theeffects weaken beyond those levels. To ensure robustness, the system GMM approach is applied,and the results remain consistent. Overall, the findings provide firm-level evidence on how inflationand wage policies influence sustainable growth and offer implications for balanced policy designin emerging markets.