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Causal Relationship between Exports, FDI and Income: The case of Vietnam

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  • Bhatt, P.R.
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    Abstract

    The objectives of the paper are to study foreign trade and investment dimensions of Vietnam in comparison with its competitors such as Indonesia, Malaysia, Philippines, Singapore and Thailand as also to study the role of FDI to the growth of exports in Vietnam. Vector autoregression model (VAR) is adopted to estimate the long run causal relationship among exports, foreign direct investment and GDP. The cointegration test result shows that there exist a long run equilibrium relationship among exports, FDI and GDP. It is found from the estimated Error Correction Model that FDI is a significant variable and the result indicates that 1% increase in FDI will lead to 0.25% increase in exports with one year time gap. Granger Causality Test indicates that there is a unilateral relationship between exports and FDI and the direction is from FDI to exports which mean that FDI causes exports.

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    Bibliographic Info

    Article provided by Euro-American Association of Economic Development in its journal Applied Econometrics and International Development.

    Volume (Year): 13 (2013)
    Issue (Month): 1 ()
    Pages: 161-172

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    Handle: RePEc:eaa:aeinde:v:13:y:2013:i:1_13

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    Related research

    Keywords: FDI; Exports; Vietnam; Error Correction Model; Cointegration; Granger Causality.;

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    1. Barry, Frank & Bradley, John, 1997. "FDI and Trade: The Irish Host-Country Experience," Economic Journal, Royal Economic Society, vol. 107(445), pages 1798-1811, November.
    2. Thornton, John, 1996. "Cointegration, causality and export-led growth in Mexico, 1895-1992," Economics Letters, Elsevier, vol. 50(3), pages 413-416, March.
    3. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501, September.
    4. M.M. Metwally, 2004. "Impact of EU- FDI on Economic Growth in Middle Eastern Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(1-2), pages 121-132.
    5. Nguyen Thanh Xuan & Yuqing Xing, 2008. "Foreign direct investment and exports," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(2), pages 183-197, 04.
    6. Helleiner, Gerald K, 1973. "Manufactured Exports from Less-Developed Countries and Multinational Firms," Economic Journal, Royal Economic Society, vol. 83(329), pages 21-47, March.
    7. Veugelers, Reinhilde, 1991. "Locational Determinants and Ranking of Host Countries: An Empirical Assessment," Kyklos, Wiley Blackwell, vol. 44(3), pages 363-82.
    8. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
    9. Vo Tri THANH & Nguyen Anh DUONG, 2011. "Revisiting Exports and Foreign Direct Investment in Vietnam," Asian Economic Policy Review, Japan Center for Economic Research, vol. 6(1), pages 112-131, 06.
    10. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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