Openness to trade, foreign direct investment, and economic growth in Vietnam

Anh-Tu Nguyen, Sajid Anwar, W. Robert J. Alexander and Shih-Hao Lu

Applied Economics, 2022, vol. 54, issue 29, 3373-3391

Abstract: Using data over the period 1986 to 2020 and employing the Auto Regressive Distributed Lag bounds testing technique, we examine the linkages amongst economic growth, foreign direct investment (FDI), exports, and imports in Vietnam. The ARDL technique is particularly well-suited in the presence of a mixture of stationary and non-stationary variables. We find a long-run relationship indicating that FDI strongly promotes economic growth, but exports and imports do not have a statistically significant impact on growth. The robustness of these results is confirmed by a range of diagnostic tests and alternative methods of estimation. Additionally, the vector error correction model reveals that, in the short-run, both imports and exports have bidirectional Granger causality with FDI, while FDI has bidirectional Granger causality with economic growth in the long-run. Our findings suggest some policies to develop FDI to bolster economic growth.

Date: 2022
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DOI: 10.1080/00036846.2021.2009112

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