Economic effects of inward foreign direct investment in Vietnamese provinces

Hiroyuki Taguchi ()

MPRA Paper from University Library of Munich, Germany

Abstract: This article examines the effect of FDI on economic growth and domestic investment with a focus on Vietnamese provinces by conducting the Granger causality and impulse response tests under a vector auto-regression (VAR) estimation using panel data. The major research questions in this study are twofold: whether the inward FDI causes economic growth or economic growth induces the FDI, and whether the inward FDI crowds in or crowds out domestic investment. Since this study targets Vietnamese provinces, it explores reginal differences in the FDI effect by dividing Vietnamese provinces according to FDI-value intensity. The VAR estimation results showed two clear contrasts on FDI effects between the FDI-intensive region and the FDI-less-intensive one. One contrast was that FDI causes economic growth in the FDI-intensive region, whereas economic growth induces FDI in the FDI-less-intensive region. Another contrast was that FDI crowds in domestic investment in the FDI-intensive region, whereas FDI crowds out domestic investment in the FDI-less-intensive region. These contrasts suggest the existence of FDI’s agglomeration effects.

Keywords: Inward foreign direct investment (FDI); Economic growth; Domestic investment; Crowd-in or -out effects; Vietnamese provinces; Vector auto-regression estimation; Granger causality and Impulse responses (search for similar items in EconPapers)
JEL-codes: F21 O47 O53 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-fdg, nep-int, nep-sea and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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