Does economic distance affect the flows of trade and foreign direct investment? Evidence from Vietnam

Thai-Ha Le

Cogent Economics & Finance, 2017, vol. 5, issue 1, 1403108

Abstract: This study examines the effect of relative economic distance (RED) between countries on bilateral foreign trade and foreign direct investment (FDI), using Vietnam as a case study. The difference in per-capita GDP is used as proxy for the RED between Vietnam and her partner countries. Modified gravity models are estimated using the procedure of panel-corrected standard errors (PCSE). The results indicate that there is a feedback and significantly positive relationship between Vietnam’s trade and FDI inflows. The economic distance between Vietnam and her partner countries has a significantly positive influence on the country’s bilateral trade and FDI inflows.

Date: 2017
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DOI: 10.1080/23322039.2017.1403108

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