Determinants of bilateral trade flows of Vietnam: evidence from panel fixed effects estimation approaches

Abstract

This study aims to investigate the determinants of bilateral trade flows of Vietnam. The panel fixed effects estimation using Driscoll and Kraay standard errors and panel fixed effects two-stage least squares approach are employed to analyze a balanced panel data, which includes fifty-three countries that have been continuously trading with Vietnam from 1997 to 2019. The estimated results reveal that free trade agreements have a positive effect on the bilateral trade flows whether in case of trading with the developed or developing countries. Additionally, the bilateral trade flows between Vietnam and the developed countries are enhanced by the difference in income level. They are, however, impeded by the institutional distance and transportation cost. In case of trading with the developing countries, transportation cost and exchange rate have a positive impact on the bilateral trade flows. Our study provides some crucial policy implications for policymakers involving international trading activities in the developing countries such as Vietnam.