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

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.

Automated summary

By using data from 1986 to 2020 and employing the Auto Regressive Distributed Lag bounds testing technique, this study investigates the linkages among economic growth, foreign direct investment (FDI), exports, and imports in Vietnam. The results show that FDI significantly promotes economic growth in the long run, while exports and imports do not have a statistically significant impact. Furthermore, both imports and exports have bidirectional Granger causality with FDI in the short run, and FDI has bidirectional Granger causality with economic growth in the long run. The findings suggest the need for policies to develop FDI and boost economic growth in Vietnam.