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Temporal causality and the dynamics of foreign direct investment and trade in Vietnam

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  • Thi Hong Hanh Pham

Abstract

Our article investigates the temporal causation between foreign direct investment (FDI) and trade in Vietnam for the period 1990--2007. We first employ Granger causality tests in a co-integration framework, where the order of lags for each variable is selected by the Akaike Information Criterion (AIC) and the Schwarz Bayesian Information Criterion (SBIC). Granger causality tests are then performed in both bi- and multi-variate models. In the short-run, we find evidence of bi-directional Granger causality between FDI and exports and between FDI and imports. Our analysis also establishes the existence of long-run unidirectional Granger causality running from FDI to exports and to imports.

Suggested Citation

  • Thi Hong Hanh Pham, 2012. "Temporal causality and the dynamics of foreign direct investment and trade in Vietnam," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(1), pages 83-113, September.
    • Handle: RePEc:taf:jitecd:v:21:y:2012:i:1:p:83-113
    DOI: 10.1080/09638190903365922
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    1. Harald Oberhofer & Michael Pfaffermayr, "undated". "FDI versus Exports. Substitutes or Complements? A Three Nation Model and Empirical Evidence," Working Papers 2007-28, Faculty of Economics and Statistics, Universität Innsbruck.
    2. Nguyen, Ngoc Anh & Nguyen, Thang, 2007. "Foreign direct investment in Vietnam: An overview and analysis the determinants of spatial distribution across provinces," MPRA Paper 1921, University Library of Munich, Germany.
    3. James R. Markusen & Anthony J. Venables, 2021. "Multinational firms and the new trade theory," World Scientific Book Chapters, in: BROADENING TRADE THEORY Incorporating Market Realities into Traditional Models, chapter 3, pages 47-67, World Scientific Publishing Co. Pte. Ltd..
    4. S. Lael Brainard, 1993. "A Simple Theory of Multinational Corporations and Trade with a Trade-Off Between Proximity and Concentration," NBER Working Papers 4269, National Bureau of Economic Research, Inc.
    5. Lionel Fontagné & Michaël Pajot, 1997. "How Foreign Direct Investment Affects International Trade and Competitiveness: an Empirical Assessment," Working Papers 1997-17, CEPII research center.
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    1. Harri Ramcharran, 2017. "Foreign direct investment in the Dominican Republic: consequences and recommendations for sustainable growth," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(3), pages 610-629, July.
    2. My Duong & Mark J. Holmes & Anna Strutt & Steven Lim, 2019. "Effects of Trade Agreements and Foreign Direct Investment on Trade: Evidence from Vietnam," International Journal of Economics and Financial Issues, Econjournals, vol. 9(3), pages 116-126.

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