INVESTMENT & ECONOMIC GROWTH: A NEXUS BETWEEN DOMESTIC INVESTMENT AND FOREIGN DIRECT INVESTMENT IN VIETNAM

Abstract

In the context of the Vietnamese economy, this research examines the effect of investment on long- and short-term economic growth. The study utilized numerous techniques to evaluate the association, including Granger causality, Johansen cointegration, and Vector Error Correction Model (VECM). Financial data from the World Bank and the General Statistics Office are used to compile data from 2000 to 2019. According to empirical evidence, domestic and foreign direct investment positively impact long-term economic growth. However, foreign direct investment has short-term crowding-out consequences before the emergence of economic spillover effects. Meanwhile, domestic investment plays a crucial role in both the short- and long-term promotion of economic growth. Our research indicates that investment activities should be concentrated, but foreign direct investment should only play a supporting role for capital and technology; meanwhile, the government is encouraged to promote domestic investment development by implementing regulations.