Relationship among Foreign Direct Investment, Exports, and Gross Domestic Product in Vietnam - A Vector Autoregression Methodology

Abstract:

This research aims to evaluate the impact of Foreign Direct Investment (FDI) and Exports (EXP) on Vietnam’s Gross Domestic Product (GDP) from 1993 to 2022, using a time series analysis approach. The analysis identifies a bidirectional causality between FDI and GDP, highlighting how economic growth attracts FDI while simultaneously utilizing its transformative potential to accelerate industrialization. However, the immediate contribution of FDI to GDP growth is both temporary and limited. In contrast, GDP is indirectly influenced by EXP, as economic expansion is the primary driver of export growth. The study advocates for the synergistic integration of domestic reforms with FDI and EXP to enhance Vietnam’s economic resilience. These findings emphasize the crucial role of long-term internal dynamics, such as productivity improvements and policy frameworks, in sustaining economic growth.