The relationship among foreign direct investment, trade openness, and economic growth in vietnam from 1991 to 2023

Nguyen Thi Van Anh; Hoang Thanh Tung; Dong Kien Quoc; Mao Khang Luan

doi:10.31893/multiscience.2025203

Keywords:

Foreign direct investment

Abstract

To analyze the impact of FDI and TO on economic growth in Vietnam, the research team collected yearly data from 1991--2023 from the Vietnam General Statistics Office on the IFS-IMF and WB sites. The study used the VECM model with the following endogenous variables: foreign direct investment (FDI), trade openness (TO), real gross domestic product (GDPR), and the interest rate of the U.S. Federal Reserve (IFED). Research results have shown that maintaining economic growth over the years drives economic growth. Moreover, the research supports the view that foreign direct investment and trade openness play important roles in promoting economic growth (g) in Vietnam. The authors propose some recommendations for attracting and using FDI and increasing trade openness to encourage economic growth in Vietnam.
References
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34. Rivera-Batiz, L. A., & Romer, P. M. (1991). International trade with endogenous technological change. European Economic Review, 35(4), 971-1001.
35. Rodríguez, F., & Rodrik, D. (1999). Trade policy and economic growth: A skeptic’s guide to the cross-national evidence. NBER Working Paper #7081.
36. Rodrik, D. (1992). The limits of trade policy reform in developing countries. Journal of Economic Perspectives, 6(1), 87-105.
37. Sichei, M., & Kinyondo, G. (2012). Determinants of foreign direct investment in Africa: A panel data analysis. Global Journal of Management and Business Research, 12(18), 85-97.
38. Tung, H. T., & Duong, L. X. (2019). Macroeconomics textbook. Bach Khoa Publishing House.
39. Tung, L. T. (2014). The relationship between foreign direct investment and trade openness in Vietnam. Development & Integration Magazine, 18(28), September-October.
40. Vamvakidis, A. (2002). How robust is the growth-openness connection? Historical evidence. Journal of Economic Growth, 7(1), 57-80.
41. Williamson, J., & O'Rourke, K. H. (1999). Globalization and history: The evolution of a 19th century Atlantic economy. The MIT Press.
42. Woo, W. T. (1995). Comments on Wei's paper (1995) Foreign direct investment in China: Source and consequences. In Financial Deregulation and Integration in East Asia (pp. 241-248). University of Chicago Press.
43. World Bank. (2002). Globalization, growth, and poverty. New York: Oxford University Press.
44. World Bank. (2019). Doing business 2019: Training for reform. Washington, DC: World Bank.
45. World Bank. (2020). Doing business 2020: Comparing business regulation in 190 economies. Washington, DC: World Bank.
46. Yasmin, B., Hussain, A., & Chaudhary, M. A. (2003). Analysis of factors affecting foreign direct investment in developing countries. Pakistan Economic and Social Review, 41(1), 59-75.

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How to cite

Anh, N. T. V., Tung, H. T., Quoc, D. K., & Luan, M. K. (2024). The relationship among foreign direct investment, trade openness, and economic growth in vietnam from 1991 to 2023. Multidisciplinary Science Journal, 7(5), 2025203. https://doi.org/10.31893/multiscience.2025203

[1] Amal, M., Tomio, B. T., & Raboch, H. (2010). Determinants of foreign direct investment in Latin America. Globalization Competitiveness & Governability Journal, 4(3), 116-133.

[2] Anh, N. T. V., et al. (2023). The impact of foreign direct investment and exports on Vietnam’s economic growth (1991-2022). World Economics Journal. https://www.world-economics-journal.com/Papers/The-Impact-of-Foreign-Direct-Investment-and-Exports-on-Vietnams-Economic-Growth-1991-2022.aspx?ID=906

[3] Antwi, S. (2013). Impact of foreign direct investment on economic growth: Empirical evidence from Ghana. International Journal of Academic Research in Accounting, Finance and Management Science, 3(1), 18-25.

[4] Asiedu, E. (2002). On the determinants of foreign direct investment to developing countries: Is Africa different? World Development, 30(1), 107-119.

[5] Balassa, B. (1978). Exports and economic growth: Further evidence. Journal of Development Economics, 5, 181-189. https://doi.org/10.1016/0304-3878(78)90006-8

[6] Barro, R. J., & Sala-i-Martin, X. (1995). Economic growth. McGraw-Hill.

[7] Batra, R., & Slottje, D. J. (1993). Trade policy and poverty in the United States: Theory and evidence, 1947–1990. Review of International Economics, 1, 189-208.

[8] Belloumi, M. (2014). The relationship between trade, FDI and economic growth in Tunisia: An application of the autoregressive distributed lag model. Economic Systems, 38, 269-287. https://doi.org/10.1016/j.ecosys.2013.09.002

[9] Binh, D. D., & Lang, N. T. (2008). International economics textbook. National Economics University Publishing House.

[10] Borensztein, E., De Gregorio, J., & Lee, J-W. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45(1), 115-135.

[11] Brems, H. (1970). A growth model of international direct investment. American Economic Review, 60(3), 320-331.

[12] Breusch, T. S., & Pagan, A. R. (1979). A simple test for heteroscedasticity and random coefficient variation. Econometrica, 47, 1287-1294. https://doi.org/10.2307/1911963

[13] Bunje, M., Abendin, S., & Wang, Y. (2022). The effects of trade openness on economic growth in Africa. Open Journal of Business and Management, 10, 614-642. https://doi.org/10.4236/ojbm.2022.102035

[14] Canh, N. P., & Quyen, P. G. (2017). The impact of foreign capital flows and trade openness on economic growth. Online Banking Magazine. http://tapchinganhang.com.vn/anh–Huong–cua–dong–von–nuoc–ngoai–va–do–mo–thuong–mai–den–tang–truong–kinh–te.htm

[15] Demirhan, E., & Masca, M. (2008). Determinants of foreign direct investment flows to developing countries: A cross-sectional analysis. Prague Economic Papers, 17(4), 356-369.

[16] Dunning, J. H. (1981). International production and multinational enterprises. George Allen and Unwin.

[17] Dunning, J. H. (1992). Multinational enterprises and the global economy. Addison-Wesley.

[18] Duong, L. X. (2011). Development economics curriculum. Labor and Social Publishing House.

[19] Esfahani, H. S. (1991). Exports, imports and economic growth in semi-industrialized countries. Journal of Development Economics, 35, 93-116.

[20] Fischer, S. (2003). Globalization and its challenges. American Economic Review, 93(2), 1-30.

[21] Foreman-Peck, J. S. (1995). A history of the world economy: International economic relations since 1850. https://www.econbiz.de/Record/a-history-of-the-world-economy-international-economic-relations-since-1850-foreman-peck-james/10000886134

[22] Frankel, A. J., & Romer, D. (1999). Does trade cause growth? The American Economic Review, 89, 379-399.

[23] Helpman, E., & Krugman, P. (1985). Market structure and foreign trade: Increasing returns, imperfect competition, and the international economy. MIT Press.

[24] Huchet-Bourdon, M., Le Mouël, C., & Vijil, M. (2018). The relationship between trade openness and economic growth: Some new insights on the openness measurement issue. The World Economy, 41(1), 59-76.

[25] Jose, D. G. (2003). The role of foreign direct investment and natural resources in economic development. Working paper No 196. Central Bank of Chile.

[26] Keho, Y., & Wang, M. G. (2017). The impact of trade openness on economic growth: The case of Côte d’Ivoire. Cogent Economics & Finance, 5(1). https://doi.org/10.1080/23322039.2017.1332820

[27] Leamer, E. E. (1995). The Heckscher–Ohlin model in theory and practice. Princeton Studies in International Finance, 77.

[28] Levine, R., & Renelt, D. (1992). A sensitivity analysis of cross-country growth regressions. American Economic Review, 82, 942-963.

[29] Linh, P. N., & Dung, N. T. K. (2008). Development economics curriculum. National Economics University Publishing House.

[30] Lucas, R. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22, 3-42. https://www.parisschoolofeconomics.eu/docs/darcillon-thibault/lucasmechanicseconomicgrowth.pdf

[31] Malefane, M., & Odhiambo, N. (2018). Impact of trade openness on economic growth: Empirical evidence from South Africa. Economia Internazionale / International Economics, 71(4), 387-416.

[32] Mankiw, N., Romer, D., & Weil, D. (1992). A contribution to the empirics of economic growth. The Quarterly Journal of Economics, 107(2), 407-437. http://www.jstor.org/stable/2118477

[33] Nguyen, M.-L. T., & Bui, T. N. (2021). Trade openness and economic growth: A study on ASEAN-6. Economies, 9(113). https://doi.org/10.3390/economies9030113

[34] Rivera-Batiz, L. A., & Romer, P. M. (1991). International trade with endogenous technological change. European Economic Review, 35(4), 971-1001.

[35] Rodríguez, F., & Rodrik, D. (1999). Trade policy and economic growth: A skeptic’s guide to the cross-national evidence. NBER Working Paper #7081.

[36] Rodrik, D. (1992). The limits of trade policy reform in developing countries. Journal of Economic Perspectives, 6(1), 87-105.

[37] Sichei, M., & Kinyondo, G. (2012). Determinants of foreign direct investment in Africa: A panel data analysis. Global Journal of Management and Business Research, 12(18), 85-97.

[38] Tung, H. T., & Duong, L. X. (2019). Macroeconomics textbook. Bach Khoa Publishing House.

[39] Tung, L. T. (2014). The relationship between foreign direct investment and trade openness in Vietnam. Development & Integration Magazine, 18(28), September-October.

[40] Vamvakidis, A. (2002). How robust is the growth-openness connection? Historical evidence. Journal of Economic Growth, 7(1), 57-80.

[41] Williamson, J., & O'Rourke, K. H. (1999). Globalization and history: The evolution of a 19th century Atlantic economy. The MIT Press.

[42] Woo, W. T. (1995). Comments on Wei's paper (1995) Foreign direct investment in China: Source and consequences. In Financial Deregulation and Integration in East Asia (pp. 241-248). University of Chicago Press.

[43] World Bank. (2002). Globalization, growth, and poverty. New York: Oxford University Press.

[44] World Bank. (2019). Doing business 2019: Training for reform. Washington, DC: World Bank.

[45] World Bank. (2020). Doing business 2020: Comparing business regulation in 190 economies. Washington, DC: World Bank.

[46] Yasmin, B., Hussain, A., & Chaudhary, M. A. (2003). Analysis of factors affecting foreign direct investment in developing countries. Pakistan Economic and Social Review, 41(1), 59-75.

Abstract

References

How to cite