Empirical research on the impact of foreign direct investment on growth in Vietnam’s economy
Author(s)
Minh Ngoc Ngo , Prof. Shujin Zhu ,
Download Full PDF Pages: 01-15 | Views: 1058 | Downloads: 256 | DOI: 10.5281/zenodo.3445737
Abstract
By employing the difference Generalized Moment of Method (GMM) and the Pooled Mean Group (PMG) methods, the paper analyzes the role of foreign direct investment (FDI) and other factors in economic growth in Vietnam in the period 2000-2015. Besides, the paper clarifies the spillover effects of FDI to other variables in the model through Granger causality test. The research collects the most balance updated data from 43 provinces or cities to run regressions. For the first time, the recurrent expenditure variable is put into the model. The fact of encoding geography control variable instead of dummy one as previous studies is another novelty of the paper. The results indicate that FDI has a positive and significant impact on Vietnamese economic growth in the long-term. Moreover, it also affirms the two-way causal relationship between FDI and other independent variables as private investment, labor force, tax revenues, infrastructure, trade openness and technology gap. This will serve as a basis for mapping out policies over FDI to boost economic growth in the coming time.
Keywords
Inward FDI, Economic growth, Panel data, Geography, Wealth, Vietnam.
References
- Arellano, M., and S, Bond. (1991). “Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations”, Review of Economic Studies, 58, pp. 277–297.
- Anh, N., et al. (2006). “The impact of FDI on economic growth in Vietnam. Report by SIDA Project, 2001-2010”, Central Institute for Economic Management.
- Anwar, S., and Lan, N. (2011). “FDI and export spillovers: Evidence from Vietnam”, International Business Review, 20, pp. 177-193.
- Adeolu B., Ayanwale. (2007). “FDI and Economic Growth: Evidence from Nigeria”. Paper presented at African Economic Research Consortium, Nairobi. 2-5 October 2007.
- Blomstrom, M., Lipsey, R.E., and Zejan,M. (1994). What explains developing country growth. 4132, Cambridge.
- Borenzstein, E., De Gregorio, J., and Lee. (1998). “How does foreign investment affect economic growth?”, Journal of International Economics, 45(1), pp.115-135.
- Bhandari, R., Dhakal, D., Pradhan, G., and Upadhyaya, K. (2007). “Foreign aid, FDI and economic growth in East European Countries”, Economics Bulletin, 6, pp. 1-9.
- Bose, Niloy., Haque, M. Emranul., Osborn, Denise, R. (2007). “Public Expenditure and Economic Growth: A Disaggregated Analysis For Developing Countries”, The Manchester School, 75(5), pp. 533 – 556.
- Campos, N.F., and Kinoshita, Y. (2002). “FDI as technology transferred. Center for Economic Policy Research”, Discussion Paper 3417.
- Chowdhury, A., and Marvrotas. (2003). FDI and growth: What causes What?, Department of Economics, Marguette University, USA, World Institute Development Economic Research/United Nation University.
- Christophe Hurlin, (2004). “Testing Granger Causality in Heterogenous Panel Data Models with Fixed Coefficients”, University Paris IX Dauphine, EURIsCO and in CEPREMAP.
- Chien, N., D. and Zhang, K., Z. (2012). “FDI of Vietnam: Two-Way Linkages between FDI and GDP, Competition among Provinces and Effects of Laws”, iBusiness, 4, pp. 157-163.
- Chien, N., D. and Linh, H.,T. (2013). “Is there strong bidirectional causality between FDI and economic growth? New evidence on Vietnam”, Journal of Transformative Entrepreneurship, 1(1), pp. 25-38.
- De Gregorio, J. (1992). “Economic Growth in Latin America”, Journal of Development Economics, 39, pp. 59-84.
- Elboiashi, Hosein Ali. (2011). The effect of FDI and other foreign capital inflows on growth and investment in developing economies, PhD thesis, Department of Economics School of Business University of Glasgow.
- George E.P.Box, Gwilym M.Jenkins, Gregory C.Reinsel, Greta M.Ljung. (2014). Time Series Analysis: Forecasting and Control, Fifth edition, Wiley Series in Probability and Statistics.
- Hoa, N. (2004). FDI and its contributions to economic growth and poverty reduction in Vietnam (1986-2001). Peter Lang. Frankfurt am Main. Germany.
- Huong, N., and Nhuong, B. (2003). “Some lessons draw out for Vietnam as comparing FDI inflows to Vietnam and China”, Journal of Economics and Developments, 86, pp. 55-75.
- Khawar, M. (2005). “FDI and economic growth: A cross-country analysis”, Global Economy Journal, 51-14 De Druyter.
- Lan. N. (2006). “FDI in Vietnam: Impact on Economic Growth and Domestic Investment”, Mimeo, Center for Regulation and Market Analysis, University of South Australia.
- Mai, P. (2003). “The Economic Impact of FDI Flows on Vietnam: 1988-1998”, Asian Studies Review, 2791, pp. 81-98.
- Mai, P. (2004). “Foreign direct investment and development in Vietnam: policy implication”, Singapore: Institute of Southeast Asia Studies.
- Omri, A., and Kahouli, B. (2014). “The nexus among foreign investment, domestic capital and economic growth: Empirical evidence from MENA region”, Research in Economics, 68, pp. 257-263.
- Ouattara, B. (2005). Foreign Aid and Fiscal Policy in Senegal, Mimeo University of Manchester.
- Pesaran, et al. (1999). “Pooled Mean Group estimation of dynamic heterogeneity panels”, Journal of American Statistic Association, 94, pp. 621 – 34.
- Phuc, D. (2004). “FDI in Vietnam- The fact, pending issues and prospects”, Journal of Economics Studies, 210, pp. 145-155.
- Pham, X.,K. (2004). “The impact of FDI on the labor productivity: the case of Vietnam”, Paper presented at Vietnam Development Forum. Hanoi, 12-14 May 2004.
- Solow, R.M. (1957).”Technical Change and the Aggregate Production”, Review of Economics and Statistics, 39, pp. 312-320.
- Wu Jyun-Yi and Hsu Chih-Chiang. (2008). “Does Foreign Direct Investment Promote Economic Growth? Evidence from a Threshold Regression Analysis”, Economics Bulletin, 15(12), pp. 1-10.
- Westerlund, J. (2007). “Testing for error correction in panel data”, Oxford Bulletin of Economics and Statistics, 69, pp. 709-748.
- Yao, S. (2006). “On economic growth, FDI and exports in China”, Journal of Applied Economics, 38, pp. 339-351.
- www.gso.gov.vn : website of General Statistical Office of Vietnam. Accessed the 08 th of January 2017, at 10:15.