The Determinants of Vietnamese Export Flows: Static and Dynamic Panel Gravity Approaches

Abstract

While the gravity model has been one of the most successful applications in empirical trade, various attempts are still made to improve its regression results. One of the recent developments in the econometric technique is to extend the gravity model to a panel data framework and take into consideration the existence of dynamic effects. In this paper, we apply these new techniques to examine the important factors which have effects on the Vietnamese export flows.Regressing both static and dynamic gravity models, we find that there is a strong correlation between the Vietnamese contemporary export flows and those of the previous year, and the dynamic model fits the data better than the static one. Vietnamese export growth generally has a positive correlation with Vietnam's and trading partner income growth. In addition, transport costs have significant effects on Vietnamese export performance. Other important factors include the exchange rate and the ASEAN membership of trading partners.

Evaluation of the Trade Relationship Between Vietnam and China; Vietnam and United States: A Comparison Using Gravity Model

“…Thus, there is strong statistical support for the Heckscher-Ohlin theory, the difference in income level between two countries pushes up the trade. This finding is similar to Batra (2006), Nguyen (2010) and Xuegang (2008).…”

“…Secondly, Nguyen (2010) applied the gravity model in both static and dynamic form for a panel data to measure the impact factors of Vietnam's export flows with its fourteen trade partners. Trading countries' income had positively impacted in Vietnam's export flows (Nguyen 2010).Therefore, due to the few number of researches and the significant economic growth as a result of trade development, the research about determinants of international trade among important trading partners like US and China, in the context of the growth of foreign trade, will be a high interest for us.…”

Economic Determinants of Nigeria’s Trade with China: A Cointegration Approach

“…Therefore, determining the various factors that can improve or deter bilateral trade relations become imperative and fitted as a round peg in a round hole. (See Tinbergen, 1962;Poyhonen, 1963;Wall, 1999;Nguyen, 2010). Mostly, these authors have made their marks by including both economic and institutional factors that determine bilateral trades.…”

“…Nguyen (2010) while reviewing Vietnam and 15 partners in trade posited that the exports from previous periods matter to current export volume and went further to buttress that economic size is positively related to trade while trade costs have significant and negative relations to trade, but exchange rates do have significant influence though the magnitude of such influence remains minor. In the same vein, Jinhwar and Orgilbold (2011) 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 (2015) concur that those factors determine export alongside terms of trade and farm gate price which possess negative influence.…”

“…Most authors have identified GDP or Per capita GDP of the importing and exporting countries as major trade determinants, (Tinbergen, 1962;Poyhonen, 1963;Linnenman, 1966;Wall, 1999;Sebbagh et al, 2015), though Elawady and Abdulkheir (2015) argued it is less important. Indeed trade openness, FDI and exchange rate are also major determinants of trade flows between nations (See Jiranyakul & Brahmabrene, 2002;Nguyen, 2010;Swenson, 2004;Fontagne, 1999;and Azu & Nasiri, 2015). Focusing on Nigeria's economic factors, this paper will absorb these major trade determining variables such as GDP, exchange rate, openness, FDI inflows.…”