The Relationship Amongst Financial Development, Economic Growth, And Foreign Direct Investment In Vietnam

Thi Hanh Vu (), Xuan-Hoa Nghiem (), Xuan Hoan Pham () and Vu Duy Do ()
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Thi Hanh Vu: Vietnam National University, Faculty of Economics and Management, International School
Xuan-Hoa Nghiem: Vietnam National University, Faculty of Economics and Management, International School
Xuan Hoan Pham: Vietnam National University, Faculty of Economics and Management, International School
Vu Duy Do: KPMG Vietnam, Private Enterprise

A chapter in Proceedings of the International Conference on Emerging Challenges: Sustainable Strategies in the Data-Driven Economy (ICECH 2024), 2025, pp 87-102 from Springer

Abstract: Abstract In international development, the relationship between economic development and foreign direct investment (FDI) has long been a topic of great interest. Although this interest has provided a wealth of information regarding the effects FDI on growth in developing countries, there has been little empirical analysis of the linkages in Vietnam compared with other developing countries. Therefore, this study investigates the impact of FDI inflows on economic development including economic growth and financial development in Vietnam. By using robust estimation method, this study aims to assess the current state of the qualitative link between environmental quality and FDI. In addition, the study uses comparative and absolute methods to evaluate. The method of synthesis and analysis aims to clarify the role of FDI in economic growth in Vietnam as a basis for giving effective measures to attract and manage FDI and promote growth. Empirical results show that FDI, domestic investment, and trade openness positively impact economic growth. Moreover, the impact of government consumption on economic growth is negative and not statistically significant. Ultimately, this paper suggests that the Vietnamese government should improve regulations governing business operations by easing the process of starting a business, controlling prices, and augmenting cooperation between training centres and Foreign-invested enterprises. Research purpose. Utilizing data from 1990 to 2019, the purpose of this study is to investigate the impacts of FDI inflows on financial development, economic growth, and further explore the factors influencing the economic development and regulatory quality by using robust least squares (RLS) method. Research motivation. In international development, the relationship between economic development and foreign direct investment (FDI) has long been a topic of great interest. Although this interest has provided a wealth of information regarding the effects FDI on growth in developing countries, there has been little empirical analysis of the linkages in Vietnam compared with other developing countries. Therefore, this study investigates the impact of FDI inflows on economic development including economic growth and financial development in Vietnam. Research design, approach, and method: - The object of the study is to investigate the impacts of FDI inflows on financial development and economic growth. - Research scope: + About space: Effects of FDI inflows on financial development and economic growth. are presented for Vietnam. + About time: The period from 1990 to 2019. - Research data: Data is collected from the World Bank, General Statistics Office of Vietnam, Statistical Yearbook. - Estimation method: Robust Least Squares (RSL). Main findings: Empirical results from RLS confirm the positive, significant impact of FDI and financial development on economic growth in Vietnam. Furthermore, domestic investment, trade openness also have similar effects while the effect of government consumption is negative and negligible. Practical/managerial implications: Empirical findings suggest that policymakers should adopt different measures to attract FDI as well as enhance labor quality to make the most use of these FDI inflows.

Keywords: Foreign direct investment; trade financial; financial development; economic growth; Vietnam (search for similar items in EconPapers)
Date: 2025
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DOI: 10.2991/978-94-6463-694-9_6

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