MACROECONOMIC DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN VIETNAM: A TIME SERIES ANALYSIS

Abstract

The foreign direct investment plays a significant role in the economic development of developing countries. In this regard, the present study aims at finding the macroeconomic determinants of foreign direct investment in Vietnam particularly focusing on interest rate, inflation, trade openness, infrastructure and economic growth controlling for labour force and gross capital formation. Time series data spanning over 1990 to 2023 period is analyzed for this purpose using Autoregressive Distributed Lag Model approach. The outcomes indicate that in the long run interest rate, inflation, trade openness, economic growth and infrastructure, all have statistically significant and positive impact on FDI. However, in the short run, infrastructure does not show any significant relationship with FDI. On the basis of these findings, a number of policies are recommended to policymakers and Vietnamese government to effectively monitor the selected macroeconomic determinants to attract more FDI inflows in Vietnam.