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Economic effects of inward foreign direct investment in Vietnamese provinces


  • Taguchi, Hiroyuki


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.

Suggested Citation

  • Taguchi, Hiroyuki, 2019. "Economic effects of inward foreign direct investment in Vietnamese provinces," MPRA Paper 92032, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:92032

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    References listed on IDEAS

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    Cited by:

    1. Hiroaki Sakurai, 2020. "Foreign Aid Loans and Economic Growth in Vietnam," Bulletin of Applied Economics, Risk Market Journals, vol. 7(1), pages 83-94.
    2. Thet Mon Soe, 2020. "Economic Effects of Inward Foreign Direct Investment in Myanmar," Bulletin of Applied Economics, Risk Market Journals, vol. 7(2), pages 175-190.

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    More about this item


    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;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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