The Influences of FDI, GFCF, OPEN on Vietnamese Economic Growth

Toan Duc Le,Yen Thi Phi Ho,Thuyen Ngoc Nguyen,Phu Huu Nguyen

doi:10.4018/ijabim.20210701.oa26

Toan Duc Le, Yen Thi Phi Ho + Show 2 more

Open Access

https://doi.org/10.4018/ijabim.20210701.oa26

Copy DOI

Abstract

The aim of study is to research the influences of Foreign Direct Investment (FDI), Gross Fixed Capital Formation (GFCF), Trade Openness of the Economy (OPEN) on Vietnam economic growth. This study uses the annual data for the period 1986 to 2019, obtained from World Bank and Vietnam General Statistics Office. The study shows that FDI, GFCF and OPEN together influence to Vietnam economic growth in the period 1986 – 2019 at significant level of 5%; in which the FDI and GFCF determinants have influenced greatly. In the short–run, the results indicate that there are bidirectional causality relationships running between FDI and GDP, OPEN and GDP, OPEN and GFCF, and there are undirectional causality relationships running from GDP to GFCF, from GFCF to FDI, from FDI to OPEN. The study’s results confirm that FDI as more reliable and less violate source of capital and can extend the Vietnam economic growth. According to the study’s results, the authors suggest some recommendations to increase the Vietnam economic growth.

Highlights

There were the previous researches that confirmed the linkage between foreign direct investment (FDI), capital formation (GFCF), trade openness (OPEN) and economic growth (GDP) tends to be positive
The results indicate that there are bidirectional causality relationships running between FDI and GDP, OPEN and GDP, OPEN and gross fixed capital formation (GFCF), and there are unidirectional causality relationships running from GDP to GFCF, from GFCF to FDI, from FDI to OPEN
A large-economic size is as a factor attracting foreign investors and a means of measuring the impact of FDI in the host countries. (b) Foreign Direct Investment (FDI – in billion US Dollars): Capital investment made to acquire a long term controlling interest in a firm operating in another country other than that of investors’ country. (c) Trade openness of the economy (OPEN - in billion US Dollars): This is value of imports plus value of exports; it is one of the factors that influence to economic growth (d) Gross fixed capital formation (GFCF - in billion US Dollars): To indicate fixed asset size used in economic activities

Summary

Introduction

There were the previous researches that confirmed the linkage between foreign direct investment (FDI), capital formation (GFCF), trade openness (OPEN) and economic growth (GDP) tends to be positive. FDI pushes economic growth in a host countries by increasing volume as well as efficiency of investment (Romer, 1986; Lucas, 1988; Baro & Salai-I-Martin, 1995). The level of GFCF is likely to influence FDI and economic growth as well. Increased in the short-run when additional capital is injected in the form of long-term investment like FDI, and this increased productivity influences economic growth in the long-run (Romer, 1986). Liberal trade regime is likely to provide an appropriate environment conducive to learning that must go along with the human capital and new technology infused by FDI (Balasubramanyam et al, 1996). The endogenous growth theories emphasize that a more open trade policy framework encourages allocative efficiency of investment by reorienting factors of production to sectors that have comparative advantages in trade; thereby promotes economic growth (Solow, 1956; Balasubramanyam et al, 1996)

Objectives

Methods

Results

Conclusion