An empirical study of the real effective exchange rate and foreign direct investment in Vietnam
Foreign direct investment (FDI) inflows to Vietnam have increased significantly in recent years. Theoretically, capital inflows will put pressure on the overvaluation of local currencies in countries, despite different exchange rate mechanisms. So, the problem facing the Vietnamese government is the...
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| Format: | Article |
| Language: | English |
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LLC "CPC "Business Perspectives"
2020-10-01
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| Series: | Investment Management & Financial Innovations |
| Subjects: | |
| Online Access: | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/14174/IMFI_2020_04_Huong.pdf |
| _version_ | 1818791176499625984 |
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| author | Tram Thi Xuan Huong My-Linh Thi Nguyen Nguyen Thi Kim Lien |
| author_facet | Tram Thi Xuan Huong My-Linh Thi Nguyen Nguyen Thi Kim Lien |
| author_sort | Tram Thi Xuan Huong |
| collection | DOAJ |
| description | Foreign direct investment (FDI) inflows to Vietnam have increased significantly in recent years. Theoretically, capital inflows will put pressure on the overvaluation of local currencies in countries, despite different exchange rate mechanisms. So, the problem facing the Vietnamese government is the need to examine the relationship between the exchange rate and FDI in order to develop effective policies. This study examined the relationship between the exchange rate and FDI in Vietnam in the period of 2005–2019 using the VAR (vector autoregression) model based on quarterly frequency data. The new points of this study are: (i) using the real effective exchange rate (REER) of the Vietnamese currency with 143 major trading partners of Vietnam; and (ii) adding two control variables into the VAR model to examine the relationship between the exchange rate and FDI in Vietnam – a case study for developing countries. The findings show that, firstly, there is a positive causal relationship between FDI and Vietnam’s real effective exchange rate. Secondly, trade openness has a positive impact on FDI and REER in Vietnam. Thirdly, economic growth has an impact on REER, but no statistically significant impact on FDI was found. The findings can provide useful information to help policymakers plan and make decisions on future policies and support further research studies. |
| first_indexed | 2024-12-18T15:07:11Z |
| format | Article |
| id | doaj.art-93109f6d6a4c488798b7271dbbbfb83c |
| institution | Directory Open Access Journal |
| issn | 1810-4967 1812-9358 |
| language | English |
| last_indexed | 2024-12-18T15:07:11Z |
| publishDate | 2020-10-01 |
| publisher | LLC "CPC "Business Perspectives" |
| record_format | Article |
| series | Investment Management & Financial Innovations |
| spelling | doaj.art-93109f6d6a4c488798b7271dbbbfb83c2022-12-21T21:03:45ZengLLC "CPC "Business Perspectives"Investment Management & Financial Innovations1810-49671812-93582020-10-0117411310.21511/imfi.17(4).2020.0114174An empirical study of the real effective exchange rate and foreign direct investment in VietnamTram Thi Xuan Huong0https://orcid.org/0000-0002-6955-1527My-Linh Thi Nguyen1https://orcid.org/0000-0001-7475-2502Nguyen Thi Kim Lien2https://orcid.org/0000-0002-7562-0381Ph.D., Associate Professor, University of Economics Ho Chi Minh CityPh.D., Associate Professor, Faculty of Finance and Banking, University of Finance-Marketing (UFM)MA, Lecturer, Industrial University of Ho Chi Minh CityForeign direct investment (FDI) inflows to Vietnam have increased significantly in recent years. Theoretically, capital inflows will put pressure on the overvaluation of local currencies in countries, despite different exchange rate mechanisms. So, the problem facing the Vietnamese government is the need to examine the relationship between the exchange rate and FDI in order to develop effective policies. This study examined the relationship between the exchange rate and FDI in Vietnam in the period of 2005–2019 using the VAR (vector autoregression) model based on quarterly frequency data. The new points of this study are: (i) using the real effective exchange rate (REER) of the Vietnamese currency with 143 major trading partners of Vietnam; and (ii) adding two control variables into the VAR model to examine the relationship between the exchange rate and FDI in Vietnam – a case study for developing countries. The findings show that, firstly, there is a positive causal relationship between FDI and Vietnam’s real effective exchange rate. Secondly, trade openness has a positive impact on FDI and REER in Vietnam. Thirdly, economic growth has an impact on REER, but no statistically significant impact on FDI was found. The findings can provide useful information to help policymakers plan and make decisions on future policies and support further research studies.https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/14174/IMFI_2020_04_Huong.pdfFDIGranger causalityREERVARVietnam |
| spellingShingle | Tram Thi Xuan Huong My-Linh Thi Nguyen Nguyen Thi Kim Lien An empirical study of the real effective exchange rate and foreign direct investment in Vietnam Investment Management & Financial Innovations FDI Granger causality REER VAR Vietnam |
| title | An empirical study of the real effective exchange rate and foreign direct investment in Vietnam |
| title_full | An empirical study of the real effective exchange rate and foreign direct investment in Vietnam |
| title_fullStr | An empirical study of the real effective exchange rate and foreign direct investment in Vietnam |
| title_full_unstemmed | An empirical study of the real effective exchange rate and foreign direct investment in Vietnam |
| title_short | An empirical study of the real effective exchange rate and foreign direct investment in Vietnam |
| title_sort | empirical study of the real effective exchange rate and foreign direct investment in vietnam |
| topic | FDI Granger causality REER VAR Vietnam |
| url | https://businessperspectives.org/images/pdf/applications/publishing/templates/article/assets/14174/IMFI_2020_04_Huong.pdf |
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