<abstract xmlns="http://www.w3.org/1999/xhtml">

<sec><h3>Aim/purpose</h3>
<p>This study explores the nexus between Foreign Direct Investment (FDI), trade openness, exchange rate, and Gross Domestic Product (GDP) per capita in Vietnam between 1986 and 2020.</p>
</sec>
<sec><h3>Design/methodology/approach</h3>
<p>The Vector Error Correction Model (VECM) was used to evaluate the nexus between FDI, trade openness, exchange rate, and GDP per capita in Vietnam between 1986 and 2020. Moreover, the Johansen co-integration test examined the long-run relationship among these variables.</p>
</sec>
<sec><h3>Findings</h3>
<p>Results address that GDP per capita, FDI, and trade openness may generate an appreciation of the Vietnamese currency in the short run. In the long run, we found that FDI inflows and trade openness support GDP per capita, but the depreciation of Vietnam Dong harms the economic growth of this country in the long run. The Johansen co-integration test confirmed a long-run association among GDP per capita, FDI inflows, trade openness, and exchange rate. Results also indicated a unidirectional causality running from GDP per capita and trade openness to FDI and exchange rate. In addition, a bidirectional causality ran from FDI to the exchange rate.</p>
</sec>
<sec><h3>Research implications/limitations</h3>
<p>Policies were recommended to facilitate macroeconomic stability for Vietnam. First, fiscal and monetary policies should be carried out to achieve targets in macroeconomic stability, economic development, employment creation, and inflation control. Second, FDI inflows should continue to be encouraged since they accelerate economic growth. Still, FDI projects should concentrate on improving labor skills and technological progress and promoting sustainable development in crucial sectors such as agriculture, energy, and the environment. Third, fostering innovation in exports by shifting focus from raw materials and inputs exports towards processed and high-value-added commodities while also promoting exports from domestic enterprises to reduce reliance on exports from FDI enterprises. Lastly, improving flexible and active exchange rate regimes consistent with real conditions in both domestic and international markets is necessary to stabilize the exchange rate and foreign currency market in Vietnam.</p>
</sec>
<sec><h3>Originality/value/contribution</h3>
<p>This paper contributes to the field by providing specific policy recommendations for Vietnam. These recommendations aim to stabilize the economy, attract FDI, renovate exports, and implement flexible and active exchange rate regimes.</p>
</sec>
</abstract>

Aim/purpose
This study explores the nexus between Foreign Direct Investment (FDI), trade openness, exchange rate, and Gross Domestic Product (GDP) per capita in Vietnam between 1986 and 2020.

Design/methodology/approach
The Vector Error Correction Model (VECM) was used to evaluate the nexus between FDI, trade openness, exchange rate, and GDP per capita in Vietnam between 1986 and 2020. Moreover, the Johansen co-integration test examined the long-run relationship among these variables.

Findings
Results address that GDP per capita, FDI, and trade openness may generate an appreciation of the Vietnamese currency in the short run. In the long run, we found that FDI inflows and trade openness support GDP per capita, but the depreciation of Vietnam Dong harms the economic growth of this country in the long run. The Johansen co-integration test confirmed a long-run association among GDP per capita, FDI inflows, trade openness, and exchange rate. Results also indicated a unidirectional causality running from GDP per capita and trade openness to FDI and exchange rate. In addition, a bidirectional causality ran from FDI to the exchange rate.

Research implications/limitations
Policies were recommended to facilitate macroeconomic stability for Vietnam. First, fiscal and monetary policies should be carried out to achieve targets in macroeconomic stability, economic development, employment creation, and inflation control. Second, FDI inflows should continue to be encouraged since they accelerate economic growth. Still, FDI projects should concentrate on improving labor skills and technological progress and promoting sustainable development in crucial sectors such as agriculture, energy, and the environment. Third, fostering innovation in exports by shifting focus from raw materials and inputs exports towards processed and high-value-added commodities while also promoting exports from domestic enterprises to reduce reliance on exports from FDI enterprises. Lastly, improving flexible and active exchange rate regimes consistent with real conditions in both domestic and international markets is necessary to stabilize the exchange rate and foreign currency market in Vietnam.

Originality/value/contribution
This paper contributes to the field by providing specific policy recommendations for Vietnam. These recommendations aim to stabilize the economy, attract FDI, renovate exports, and implement flexible and active exchange rate regimes.

The relationship between Foreign Direct Investment, trade openness, exchange rate, and Gross Domestic Product per capita in Vietnam

Faculty of Accounting and Business Management

Vietnam National University of Agriculture, Trau Quy

Department of Macroeconomics and Agricultural Economics

Poznań University of Economics and Business

Journal of Economics and Management

This work is licensed under the Creative Commons Attribution-NonCommercial 4.0 International License.

Aim/purpose
This study explores the nexus between Foreign Direct Investment (FDI), trade openness, exchange rate, and Gross Domestic Product (GDP) per capita...

The relationship between Foreign Direct Investment, trade openness, exchange rate, and Gross Domestic Product per capita in Vietnam

Published Online: Jul 01, 2024

Page range: 189 - 212

Received: Mar 27, 2024

Accepted: Jun 18, 2024

DOI: https://doi.org/10.22367/jem.2024.46.08

Keywords
Foreign Direct Investment (FDI), trade openness, exchange rate, Gross Domestic Product (GDP) per capita

© 2024 Anh Tru Nguyen et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial 4.0 International License.

The relationship between Foreign Direct Investment, trade openness, exchange rate, and Gross Domestic Product per capita in Vietnam

Published Online: Jul 01, 2024

Page range: 189 - 212

Received: Mar 27, 2024

Accepted: Jun 18, 2024

DOI: https://doi.org/10.22367/jem.2024.46.08

KeywordsForeign Direct Investment (FDI), trade openness, exchange rate, Gross Domestic Product (GDP) per capita

© 2024 Anh Tru Nguyen et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial 4.0 International License.

Keywords
Foreign Direct Investment (FDI), trade openness, exchange rate, Gross Domestic Product (GDP) per capita