Tác động của đầu tư trực tiếp nước ngoài (FDI) tới biến động kinh tế vĩ mô ở việt nam tt tiếng anh

1 INTRODUCTION Research significance Many theoretical and practical studies confirm that FDI has both positive and negative impacts on the economy, especially the economy of developing countries, creating the economy’s macroeconomic fluctuations FDI has a positive impact on the receiving country when capital is invested in production, trade, productivity improvement, import and export promotion, management experience transfer, advanced technology, spillover effects creation in developing markets and domestic enterprises, job creation, economic growth promotion, budget revenues increase, etc contributing to creating macroeconomic stability However, the studies also prove that FDI in highly speculative sectors such as real estate, securities, etc can cause inflation, exchange rate fluctuations, "dollarization" phenomenon, "Bubble" of the stock and real estate market, etc The fact that many FDI projects are the same in localities, the big difference between registered capital and implemented capital, the phenomenon of "price transfer" and early registration high investment but not using external capital but mobilizing capital from receiving countries in FDI enterprises due to poor management, causing negative impacts on domestic production, the ability to effectively use investment and financial capital state production, the independence of the economy from the outside and the sustainability of the economic structure, etc which then can lead to macroeconomic instability in the country receiving FDI Vietnam, after more than 30 years of implementing "Doi Moi", especially after the Foreign Investment Law was established (in 1987), supplemented and modified many times, has attracted a large amount of FDI for economic development Studies show that FDI contributes positively to the economy of Vietnam, contributing to growth promotion, job creation, and international integration, actively and positively contributing to macroeconomic stability However, in the period 1991 - 2017, together with the increasing FDI into Vietnam both the number of projects and registered capital, implemented capital, Vietnam also witnessed periods of macroeconomic instability (the period 1991 - 1994, 1995 - 1999, and 2008-2013), especially since the financial crisis and world economic recession in 2008 In the period 2008-2013, Vietnam's economy revealed macroeconomic instabilities situations such as: high inflation, volatile exchange rate, unstable payment balance, large budget deficit, etc These are the fluctuations of the macro economy that are attributed to present and from previous years This raises the question of how FDI relates to macroeconomic fluctuations in Vietnam The answer to the above question as well as a comprehensive and profound assessment of the impact of FDI on macroeconomic fluctuations in the period of 1991 - 2017 in current conditions is necessary because FDI is playing a very important role for Vietnam's economic development In the coming time, attracting FDI is still a big target of Vietnam, as well as Vietnam will still be an attractive investment destination for foreign investors, while Vietnam's current top target and the next is macroeconomic stability, ensuring fast, sustainable, high quality, and long-term growth Therefore, the study contributes to giving a comprehensive view on FDI and the relationship between FDI and macroeconomic fluctuations in Vietnam, thereby drawing the cause, proposing solutions to attract and use FDI effectively in the next stages to ensure macroeconomic stability, contributing to the implementation of Vietnam's macro-economic goals in the coming time There have been many studies on the positive effects of FDI on socio-economic development; as well as studies that mention the negative impact of the FDI on economy, society, and environment in each aspect separately However, there has not been any comprehensive and profound research on the impact of FDI on macroeconomic fluctuations in the period of 1991 - 2017 in Vietnam on many aspects and relationships Therefore, the topic "The impact of foreign direct investment (FDI) on macroeconomic fluctuations in Vietnam" is chosen to be the thesis topic Subjects, objectives and scope of research of the thesis 2.1 Research subjects Impact of FDI on macroeconomic fluctuations in Vietnam 2.2 Objectives of the study The research topic focuses on the following objectives: - Systematize the theory of FDI, macroeconomic fluctuations, and the impact of FDI on macroeconomic fluctuations of an economy - Analyze and evaluate the situation of attracting and using FDI, the situation of macroeconomic fluctuations and the impact of FDI on macroeconomic changes in Vietnam from 1991 - 2017 - Propose solutions to attract, manage, and effectively use FDI, take advantage of positive impacts and limit negative effects of FDI on Vietnam's macroeconomic situation in the coming time 2.3 Research scope - Regarding the scope of content: Studying the situation of attracting, using FDI and Vietnam's macroeconomic fluctuations in the period of 1991 - 2017 through the evaluation of both single macroeconomic indicators (GDP; inflation; budget deficit; exchange rate fluctuations) and aggregate macroeconomic instability index (MII macroeconomic instability index proposed by Ismihan et al (2002) Assessing the level of FDI impact on Vietnam's macroeconomic fluctuations in the period 1991 - 2017 through assessing the impact of FDI on single macroeconomic indicators and MII aggregate index - About the scope of space and time: The study was conducted at the national level of Vietnam from 1991 to 2017 The thesis selected this period because in 1988 when Vietnam started to implement the Investment Law However, not until 1991 did registered FDI capital begin to disburse In 2017, the study is full of statistics Research methods - By using Eview software 8.0 to estimate the impact of FDI on macroeconomic fluctuations in Vietnam through the impact of FDI on single macroeconomic indicators and impact on the macroeconomic instability index (The contents of the steps conducted under this method will be presented in chapter of the thesis) - Statistical methods, described from official and reliable data sources to assess the status of attracting and using FDI in Vietnam; Vietnam's macroeconomic situation in the period of 1991-2017 through single macroeconomic indicators and macroeconomic instability index (MII) The scientific and practical significance of the thesis (1) In theory: - Generalizing the theory of macroeconomic volatility, how to measure macroeconomic fluctuations, indicators representing macroeconomic fluctuations There is a study on macroeconomic fluctuations but not a comprehensive overview of indicators that represent macroeconomic volatility and a measure of concentration that focuses on one or several single macroeconomic indicators - Generalizing the theory of the impact of FDI on macroeconomic fluctuations There are many studies on two separate issues: FDI and some indicators of macroeconomic fluctuations, or just generalizing the theory of FDI impacts on several individual macroeconomic indicators Until now, there has not been any research to assess the theory of the impact of FDI on the overall macroeconomic indicators that are considered to represent macroeconomic changes (2) In practice: - The thesis evaluates and analyzes relatively comprehensively the situation of attracting, using FDI, the situation of macroeconomic changes and the impact of FDI on macroeconomic changes in Vietnam in the period of 1991 - 2017 Using the formulas to calculate the macroeconomic instability index (MII) of Vietnam in the period of 1991 - 2017 At the same time, using the quantitative model to show the variables to show or measure the variable level macroeconomic dynamics of Vietnam; points out the factors affecting Vietnam's macroeconomic fluctuations in the period 1991 - 2017 - Through the quantitative model, the thesis presents the results of assessing the impact of FDI on Vietnam's macroeconomic fluctuations in the period of 1991 - 2017 - Based on the results of analysis and evaluation, the thesis proposes solutions to attract, manage and effectively use FDI, take advantage of positive and limit negative impacts of FDI, aiming at the goal stabilize Vietnam's economy at a high level in the next period (3) New contributions of the thesis - In the context of many studies showing the fluctuation of single economic indicators to attract and use FDI, but very limited research topics in contrast are the impact of FDI on single macroeconomics indicators for Vietnam like this thesis - Almost no research has evaluated the impact of FDI on macroeconomic volatility on both single macroeconomic index and general macroeconomic index (economic instability index - MII) of Vietnam in the period of 1991 - 2017 with data according to the quarter as this thesis does The empirical research results of the thesis have contributed to the theory of the impact of FDI on Vietnam's macroeconomic fluctuations in the period of 1991 - 2017 Structure of the thesis In addition to the introduction, conclusion, summary list, references and appendices, the thesis is divided into chapters: Chapter 1: Overview of research on the impact of foreign direct investment on macroeconomic fluctuations Chapter 2: Theoretical basis for the impact of foreign direct investment on macroeconomic fluctuations Chapter 3: Current situation of foreign direct investment and macroeconomic changes in Vietnam in the period 1991 - 2017 Chapter 4: Impact of foreign direct investment on macroeconomic fluctuations in Vietnam Chapter 5: Orientation and suggestions for some policies for Vietnam For expressing macroeconomic situation through a single macroeconomic index, researchers often use indicators such as: (1) Index of economic growth: The index commonly used to show economic growth is: Gross domestic product (GDP) Ramey & Ramey (1995) and Acemoglu et al (2003) studied macroeconomic fluctuations using the standard deviation of GDP growth rate per capita Di Giovanni and Levchenko (2010), and Van der Ploeg and Poelhekke (2009) use the standard deviation of GDP per capita and exports measure macroeconomic fluctuations (2) Inflation index Researchers such as Fischer (1991), Ramey and Ramey (1994), Drugeon and Wignolle (1996), Azam (1997, 1999), Yiheyis (2000), Caballero (2007), Iqbal and Nawaz (2010), and Shahbaz (2013) use inflation as a proxy for the macroeconomic situation of the economy Olaniyan (2000) also points out that inflation and inflation fluctuations are important signals to assess macroeconomic instability in Nigeria and have a negative impact on investment (3) Budget deficit index: Fischer (1993) considers budget deficits as a sign that the Government cannot use tools to intervene in the economy, leading to macro instability (4) Exchange rate index Campa and Goldberg (1995), Azid et al (2005) select exchange rates to consider the macroeconomic situation of the economy, whereby exchange rate fluctuations make unsure investment decisions, so investors tend to wait for enough information to decide investment, affect economic efficiency Obstfeld and Rogoff (1998) affirmed that exchange rate fluctuations increased trade costs and deficits, affecting economic growth Some studies have used simultaneous review of single macro indicators Fissher (1993), Bleaney (1996) and Ismihan, Metin-Ozcan & Aysit (2002) in their study simultaneously consider indicators such as inflation rate, budget deficit rate / GNP and foreign debt ratio / GNP to assess the macroeconomic situation of the economy, thereby affirming the increasing status of one of the above indicators, showing an economy with a macroeconomic instability Meanwhile, Sameti et al (2012) chose to observe the collection of variables such as GDP, inflation, current account deficit, foreign exchange reserves and budget deficit to determine the degree of macroeconomic volatility In addition, Hausman & Gavin (1996), using indicators such as GDP, investment and labor productivity to consider the level of economic fluctuation of the economy 1.1.2 Aggregate macroeconomic index IMF (2001) also provides an overall index of vulnerability index (VI) to reflect the macroeconomic fluctuations of an economy This index is calculated based on the weighted average of a set of indicators including: External sector index (proportion of reserves against short-term debt, current account deficit; current account / GDP balance) , foreign debt / GDP, foreign debt / export, REER exchange rate deviation); public sector index; financial sector index; business sector index Ismihan (2002) developed the macroeconomic instability index (MII), using four indicators: inflation rate, foreign debt / GNP, budget deficit / GNP, exchange rate, results of this index fluctuates from 0-1 to show macroeconomic fluctuations, if the result is gradually going to is big economic instability, progressing to is economic stability Similarly, Jaramillo and Sancak (2007) also set the index of macroeconomic instability with aggregate variables such as fluctuations of inflation, exchange rates, foreign currency reserves against base money and budget deficits for GDP In addition, Ali (2015) uses an aggregate index including: inflation, unemployment, budget deficit and trade deficit to show macroeconomic instability in Pakistan In addition, IMF (2015) proposed the method of index of growth reduction (GDVI) to quantify risk and assess the impact on macro variables, especially the risk of external shocks impact on growth decline CHAPTER OVERVIEW OF RESEARCH ON THE IMPACT OF FOREIGN DIRECT INVESTMENT ON MACROECONOMIC FLUCTUATIONS 1 The economic indexes that show the macroeconomic fluctuation of an economy Domestic and foreign studies show that the macroeconomic fluctuation of an economy is expressed by researchers through a single macroeconomic index or by observing a group of macroeconomic indicators simultaneously or through a quantified index that is a set of several single macro indicators 1.1.1 Single macroeconomic index 5 1.2 Impact of FDI on macroeconomic fluctuations of an economy 1.2.1 Impact of FDI on GDP fluctuations Chen (1979), Ahikpor (1990), Hill and John (1991) and Todaro (1994), Liu, Burridge and Sinclair (2002), Wasantha Athukorala (2003), Jallab (2008), prove FDI has a positive impact to the economic growth of developing countries such as: (1) FDI provides countries to receive additional domestic investment, advanced technology and equipment or financial support to import goods that they cannot be produced (2) FDI can increase labor productivity of countries that receive capital through technology transfer, provision of equipment and other intermediary products for domestic producers and local labor training, engineers and managers in investment-receiving countries Besides, products of foreign companies compensate for imported products, thereby reducing the trade deficit (3) FDI enterprises contribute significantly to the budgets of host countries; create jobs and increase income directly or indirectly for local workers; promote demand for domestic products; consumption of raw materials of domestic enterprises and export promotion of receiving countries, directly or indirectly contributing to their economic growth In Vietnam, Nguyen Van Tuan (2005) assessed and discovered the impact of FDI on GDP growth, technology transfer, employment promotion, economic restructuring, and increased exports and international relationship expansion Tran Minh Tuan (2010) evaluated the role of economic integration in attracting FDI and the positive impact of FDI on the economy such as: promoting economic restructuring; increase production capacity and industrial revenue; Contributing significantly to the goal of creating jobs and improving the quality of human resources Nguyen Phi Lan (2006) proves that FDI affects Vietnam's exports during the research period Nguyen Thi Tue Anh (2006) shows that FDI has a positive impact on economic growth in Vietnam during the period of 1986-2006 1.2.2 Impact of FDI on inflation fluctuations Balasa (1964) and Samuelson (1964) noted the difference in productivity caused by the difference in technological progress of FDI enterprises, resulting in faster labor productivity growth in the commercial goods sector Higher wages in these areas, which spread to other sectors, put pressure on wage increases and other costs, directly impacting inflation in the country receiving FDI Takagi and Esaka (2001) and Reinhart and colleagues (2008) conclude that when inflows are large and stable, certain impacts on money supply growth will be exerted, thereby putting pressure on the inflation of the economy Notably, Kawai and Tagaki (2009) show that high inflows of capital, especially capital into highly speculative industries, will increase credit, create hot growth and inflation, and influence adversely affecting the goal of sustainable growth and ensuring price stability; causing many risks of instability of the financial-banking system such as increasing bad debts in banks and risks related to massive foreign investors withdrawing capital 1.2.3 Impact of FDI on exchange rates Researchers like Calvo, Leiderman and Reimhart (1993) tested capital inflows in emerging economies in Latin America from 1988 - 1992, indicating that except Brazil, all real exchange rates are countries in Latin America affected by FDI Similarly, El Badawi and Soto studied the impact of four separate factors: short-term capital flows, long-term capital flows, indirect investment and FDI to Chile, resulting in long-term capital inflows and FDI Significant impact on the exchange rate in this country Javorick (2004) has other results when it concludes that the spillover effect of FDI can also improve local production capacity through technology transfer and management, thus reducing the pressure on the real exchange rate Biswas and Dasgupta (2012) examined the impact of capital inflows on India on the real exchange rate using quarterly data in the period 1994-95Q1 to 2009-2010Q4, showing shocks to FDI impact that has extremely long-term positive impact on real exchange rates, although some stages are negative 1.2.4 Impact of FDI on budget deficit Rostow (1956, 1971) considered FDI as a source of capital, technology transfer and budget deficit in countries receiving FDI, especially developing countries in the transition process FDI enterprises through direct and indirect business contributions (through industries, support, supply and labor wages in FDI enterprises, ) into the state budget revenue source The budget deficit is a phenomenon of spending larger than revenue, so the increase in FDI revenue for the budget will contribute to reducing the budget deficit 1.3 Conclusion As shown above, both qualitative and quantitative studies in the world and in Vietnam have generalized the impact of FDI on macroeconomic fluctuations However, there are some research gaps for the thesis to implement, specifically: First, in theory, the existing studies have not given the overall economic indicators that show the macroeconomic fluctuations of an economy Therefore, there is no research on the overall theory of the impact of FDI on macroeconomic fluctuations of an economy Secondly, in practice, there are no studies using quantitative methods to assess the impact of FDI on aggregate macroeconomic index (such as MII macroeconomic instability index) which is a combination of some single macroeconomic index through a certain formula to show Vietnam's macroeconomic fluctuations according to quarterly figures from quarter 4/1991 to quarter 4/2017 Thirdly, there has not been any research based on the overall assessment of the impact of FDI on macroeconomic fluctuations to propose solutions to enhance attraction and use of FDI for macroeconomic stability objectives in Vietnam in general In order to continue to contribute to the current theoretical basis of the impact of FDI on the macroeconomic volatility of an economy and fill the research gap, the thesis aims at the following three research questions: (1) What is the theory of the impact of FDI on the macroeconomic fluctuations of an economy? (2) Is there an impact of FDI on indicators showing macroeconomic fluctuations in Vietnam in the period 1991 - 2017, if so, how does it affect? (3) How to attract and effectively use Vietnam's FDI in order to limit the negative changes of macro economy in the coming time? CHAPTER THEORETICAL BASIS FOR THE IMPACT OF FOREIGN DIRECT INVESTMENT ON MACROECONOMIC FLUCTUATIONS 2.1 Foreign Direct Investment 2.1.1 Concept and classification There are many studies in the world on FDI, including the concept of FDI, an overview of the concepts of OECD (1999), UNCTAD (1999), IMF (2011) that basically show that the above definition has the following key characteristics: (1) is the flow of investment capital (money and assets) mainly due to transnational companies moving from one country to another, leading to an increase in money quantity and property of the host country The investment time of FDI is long-term, stable and highly binding, not favorable for the withdrawal of capital as commercial loans, or other indirect investment (2) The transfer of this capital through the establishment of new enterprises (FDI enterprises), business cooperation contracts, and acquisition of existing branches or businesses, purchase of shares at controlled or advanced operating mergers and acquisitions (3) Foreign investors are wholly or jointly owners of investment capital with a certain percentage sufficient to participate in direct management of enterprises' operations and directly control and administer the movement process of investment capital flow Therefore, investors are responsible for investment capital as well as profits or risks of the process of investing that capital flow (4) FDI is a private investment activity, subject to market relations on a global scale, less affected by political relations between countries, governments and organizational objectives The version is always profitable FDI does not create high-interest debt or political, social, or military-binding requirements between the investment and the recipient country (5) FDI is considered both from an external investment into a country and from outside the country External capital may be part of the profit of the investment or the process of withdrawing investment capital from the country or moving to another country Regarding FDI classification, according to Vietnam's Investment Law (2005), FDI classification includes: Business cooperation contract; Venture business; Enterprises with 100% foreign capital; Form of investment in buying shares or merging or acquiring enterprises In addition, governments now encourage foreign investors to participate in other forms of investment such as BOT (Construction - Exploitation - Transfer), BTO (Construction - Transfer - Exploitation) and BT (Construction - Transfer), etc Forms classified according to Vietnam's investment law are the basis for the thesis to describe the situation of FDI in Vietnam in the period of 1991 - 2017 2.1.2 The determinants of FDI There are many studies both theoretical and empirical about the determinants of FDI including: (1) Scale of the country receiving investment (2) Openness of the economy (3) Cost and labor productivity (4) Political risks (5) Infrastructure In addition to the above factors, other factors also have an impact on attracting FDI of the investment recipient countries such as: Corporate income tax; the elements of international investment environment The elements belong to the investment country The macroeconomic policy of the country has investors including financial policy - monetary impact on real interest rates, inflation ; import and export policies and foreign exchange management; the policy of promoting foreign investment by foreign investors is a big decision to the foreign investment decision of foreign investors 2.1.3 Impacts of FDI on the recipient country FDI has been recorded to have positive and negative impacts on countries that bring in capital to invest abroad, specifically: Positive impacts: FDI replenishes domestic capital for economic growth, in which FDI helps increase resources investment capital for production and domestic industries and economic development, thereby boosting economic growth Secondly, the receiving country receives advanced and modern technology, technological know-how and management skills Thirdly, the investment recipient country has the opportunity to join the global production network, in which not only FDI enterprises but also other domestic enterprises having business relations with FDI enterprises also participate in the assignment process This is favorable for enterprises receiving investment to boost exports Fourthly, with the expansion of production from FDI, the number of jobs for people increased, increasing income and thereby increasing domestic purchasing power Moreover, through FDI, local and investment-receiving projects, it is possible to increase the budget contributed by FDI enterprises, as well as create stimulus to develop infrastructure for attracting and using FDI in the host country Negative impact: easily dependent on foreign capital, technology, market and politics; must share their national interests, interests and special resources with the investment country; the economy is out of balance; can become an industrial waste dump of advanced countries 2.2 Macroeconomic fluctuations 2.2.1 Concept of macroeconomic fluctuations Through surveying the use of the phrase "macroeconomic fluctuations" in some studies, the thesis uses the definition of expressing macroeconomic fluctuations for the analysis and evaluation of the thesis content as follows : Macroeconomic volatility is the growth or slump of an economy over a period of time, as shown by changes in single macroeconomic indicators and aggregate macroeconomic indicators, including: GDP, inflation, exchange rate, budget deficit, and macroeconomic instability index 2.2.2 Factors affecting macroeconomic fluctuations Considering macroeconomic instability as a phenomenon of macroeconomic fluctuations, research of Ha Thi Thieu Dao (2013) shows that there are both internal factors (monetary policy, fiscal policy and combination) and external factors (openness, integration of the economy with the world; inflows and foreign trade rates) affect macroeconomic instability Particularly for the external factors, the level of integration of the world economy for a country's macroeconomic situation, not only causes macroeconomic instability (when there is a crisis) the world economy) (Mauro and Becker, 2006) but also create macroeconomic stability (when the world economy flourishes, helping the country promote exports, receive investment capital, ) Thus, basically, the researches unified the factors affecting macroeconomic changes, including: monetary policy; fiscal policy (Fatas and Mihov 2006, 2007 considers these factors a direct impact of macroeconomic fluctuations); the combination of monetary and fiscal policies; the level of openness and integration of the economy with the world; inflows (including FDI inflows) and foreign trade 2.2.3 Show macroeconomic fluctuations 2.2.3.1 Single macroeconomic indicators show macroeconomic fluctuations Overview of research shows that indicators such as GDP, inflation, budget deficit, exchange rate fluctuations, etc are often selected by some studies to represent macroeconomic fluctuations in some related studies 2.2.3.2 An index combining single macroeconomic indicators There are some indicators selected by researchers to represent the situation of macroeconomic fluctuations of the economy, specifically: Index of macroeconomic instability (MII): MII was developed by Ismihan et al (2002) based on the method of developing the HDI index of UNDP (1992), based on data of single macroeconomic variables Retail includes: Inflation rate, budget deficit / GNP; foreign debt / GNP and exchange rate fluctuations, to calculate the value of MII in steps: Step Calculate the component indicators according to the following formula: With It the index index value of the macro variable X in year t; Xt is the value of the macro variable X year t, Xmin (Xmax) is the smallest (largest) value of the macro variable X in the whole period The component index value of the macro variable X will be in the range of to (0≤ It ≤1) Step Calculate MII by simple average of the component indicators MII = (It1 + It2 + It3 + It4) / 10 The above formula shows that 0≤ It ≤1 should 0≤ MII ≤1, this is explained: the lower the value of MII is 0, the lower the level of macroeconomic instability, and the closer it gets By 1, the macroeconomic instability is higher The index of macroeconomic instability (mii) proposed by Jaramillo and Sancak (2007) is based on macroeconomic indicators including: fluctuations of inflation rate, exchange rate, reserve accumulation rate compared to base money and the ratio of budget deficit to GDP: FDI increases capital production, investment, modern technology, technology transfer and good management will increase labor productivity, reduce waste in production, and create investment effects on mechanics Certain infrastructures serve production, which helps businesses business effectively, generate large profits, contribute to paying taxes to contribute to the state budget and limit public investment in infrastructure, and training of human resources, etc In addition, through increasing investment capital, technology and training human resources, increasing labor and income for people and opening new opportunities for industries and sectors newly born, increasing the number of businesses and business households, thereby increasing budget revenue Combining expenditure reduction, increasing budget revenue, contributing to stabilizing the state of budget deficit 2.3.3 Impact of FDI on inflation fluctuations In the situation of inflation economy, FDI in manufacturing sector has a positive impact on stabilizing inflation according to the impact channels: FDI in manufacturing reduces budget deficit and deficit The decrease in budget reduces the pressure of increasing money supply, which also contributes to reducing inflation due to high money supply FDI invested in production with modern technology, advanced management increases labor productivity, increases the competitiveness of goods and attracts other investors to the manufacturing sector This affects inflation stabilization through two channels: (1) reducing inflation from the causes of pull demand Due to the increasing supply (more people producing and increasing productivity and quality), balancing the aggregate demand, thereby reducing the level of pull, bring about equilibrium, thereby stabilizing inflation; (2) reducing inflation from pushing costs Main modern technology, good management, etc has reduced product prices, which is the basis for reducing selling prices, limiting pushing costs to consumers, contributing to reducing inflation due to pushing costs However, outdated technology FDI increases the budget deficit, leading to pressure to increase money supply, directly affecting inflation In addition, due to low productivity, raw products, poor quality management, waste, etc this makes product prices rise, affecting inflation 2.3.4 FDI impact on exchange rate fluctuations FDI impacts on exchange rate fluctuations through channels such as FDI affecting inflation, causing inflation pressure to cause exchange rate fluctuations The next channel, FDI affects the balance of payments through impact on current accounts and capital accounts For the impact on the current account, the trade balance is part of the current account, while the previous study shows that FDI has an impact on exports and imports, which in turn has an impact on the trade balance Therefore, FDI affects current accounts In terms of the impact of FDI on capital accounts, it is clear that implemented FDI contributes directly to the capital account, so FDI has a direct impact on the capital account With the direct impact on the capital account, indirectly on the current account, it can be concluded that FDI affects the balance of payments of an economy 2.3.5 Impact of FDI on aggregate macro index First, FDI impacts on single macro indexes that constitute components of the general macroeconomic index that can be in the same direction or opposite to single indexes constituting the aggregate macroeconomic index; the balance between the same direction and the positive direction will be the result of assessing the impact of FDI on the aggregate macroeconomic index Secondly, analyzing the impact of FDI on macro indexes by quantitative analysis through mathematical model In which, the general macro index is the dependent variable, FDI and the variables represent the cause of macroeconomic situation (internal and external mii: macroeconomic instability index at time t; Ln: natural base logarithm; CPI: consumer price index; er: exchange rate of national currency against USD; res: international reserve amount; bm: base money; fbal: state of budget deficit; gdp: nominal GDP; σ: standard deviation of each variable The index of growth reduction (GDVI) was set by IMF in 2015 to quantify the risk and assess the impact on macro variables, especially the risk of external shocks affecting the decline This method is described by Le Thi Thuy Van (2016) following the following steps:(1) Determining the period of external shock occurrence and defining growth crisis;(2) Select regional indicators including real GDP, overall fiscal balance, growth in partner countries and foreign exchange reserves; (3) Build a aggregate index based on the combination of warning signals emitted from component indicators when this index exceeds the threshold and determine the proportion of the component index, contributing to only synthesis number Overall vulnerability index (VI): an index built on the weighted average of a set of indicators including: External sector index (proportion of reserves against short-term debt, deficit) current account, current account/GDP, foreign debt/GDP, foreign debt/export, REER exchange rate deviation; public sector index; financial sector index; business sector index 2.3 Theoretical basis of the impact of FDI on macroeconomic fluctuations 2.3.1 The impact of FDI causes fluctuations in GDP Based on the formula GDP = NX + G + C + I (NX = Export - Import, G: government spending, C: consumption; I: social investment), obviously FDI contributes capital investment for the total social investment capital (I), this is a factor that directly affects GDP and indirectly through exports when FDI contributes to increasing labor productivity, enhancing product quality and reducing prices (due to reduced production costs) increased competitiveness for export goods, thereby increasing export value Moreover, FDI helps the host country to convert the structure of export products from simple and low-value goods to high value export goods FDI also helps connect host countries in the global value chain At the same time, through this activity, FDI enterprises import auxiliary materials and equipment from enterprises of investment-receiving countries, making export value increase In addition, FDI contributes to market expansion for host countries Accordingly, FDI enterprises often export back to their countries and other major markets of enterprises that produce goods in investment-receiving countries, making these countries expand their markets in investment countries and other major markets, this directs domestic enterprises to receive investment to find ways to approach these markets more conveniently 2.3.2 Impact of FDI on fluctuations in budget deficits 11 12 factors) are independent variables Based on quantitative results to analyze the level of FDI impact on the aggregate macro index CHAPTER FOREIGN DIRECT INVESTMENT AND VIETNAM'S MACRO-ECONOMIC PERFORMANCE IN THE 1991 -2017 PERIOD Basically, almost all provinces and cities of Vietnam have attracted FDI with different forms of investment, many of which have become centers of FDI projects However, localities with better infrastructure have attracted greater FDI, such as Dong Nai, Binh Duong and TP Ho Chi Minh, Hanoi, Hai Phong While mountainous and rural localities are less attractive to FDI projects, causing imbalance in attracting FDI in Vietnam 3.1.5 Investment sector FDI is present in almost all economic sectors of Vietnam, in which the processing and manufacturing industry has the largest number of projects and investment capital This sector increased very rapidly in the period 1988- 2004, 2005-2011 and 2012 - 2017, particularly in the period of 2012 - 2017, nearly times higher than the number of projects and registered capital compared to the period 1988 - 2004 The field of creating new value also increased very quickly, such as trade, repair and production, distribution of electricity, gas and water, with a period of up to 10 times in both capital and investment registration projects Transportation, warehousing and communication also increased rapidly in terms of number of projects and registered capital, creating a favorable investment environment for FDI attraction, especially for commercial purposes (when transportation costs are low) More, more convenient ) The areas related to the service industry, professional activities, science and technology all have a large number of investment projects compared to other fields These areas directly create new values are those areas where registered FDI projects increase rapidly, indicating that FDI in Vietnam is being attracted in the right direction However, in the 1988 - 2017 period, the field of real estate, hotel and restaurant business has a number of registered FDI projects accounting for only 5.15% of the total projects, but accounting for 20.45% of the total business, ranked second after manufacturing, processing and manufacturing 3.2 The situation of macroeconomic changes in Vietnam 1991 - 2017 3.2.1 Assessment based on single macroeconomic indicators 3.2.1.1 Movement of economic growth In the period of 1988-1991, economic growth was unstable, due to instability from the previous period, especially the collapse of the Soviet Union and Eastern European countries, strongly affecting the socio-economic situation of Vietnam However, in the period 1992 1994 there was a continuous breakthrough, if in 1991 Vietnam still had to borrow food, then in 1992 became the third rice exporter in the world, this period has many policies Vietnam's economy began to bring about positive results In the period 1995-1998, the highest GDP reached in 1995 (reaching 9.54%, the highest level up to the present time, considered to have positive results from the previous period), but from 1996 onwards due to the impact of financial crisis in Asia, Vietnam's GDP fell sharply, causing macro instability The period 1999 - 2000 was marked with the lowest level of GDP reduction (only 4.77%), also the year ending the impact of the regional financial crisis In 2000, the economic growth rate started to rise again due to the more stable situation In the period 2001 - 2007, Vietnam's economy continued to grow at a high level, the highest level was 8.5%, this is the period when Vietnam increased international integration, export value was boosted, along with with an increase in the number of businesses from different economic sectors However, stepping into the period of 2008 - 2011, when the world economy and Vietnam recession since 2008, a number of large export markets of Vietnam have difficulties, along with public debt and inflation issues increase so the economic growth rate after 2007 decreased significantly From 2012 to 2017, Vietnam has accelerated the implementation of macroeconomic stabilization policies, controlled economic situation, and the world economy is gradually recovering, making 3.1 The situation of attracting and using FDI in Vietnam from 1991 - 2017 3.1.1 Investment license After the Foreign Investment Law in Vietnam was established in 1987 and amended in 1990, 1992, 1996, 2000, 2006 and 2014, Vietnam attracted a large number of FDI projects By the end of December 2017, the number of valid FDI projects in Vietnam was 24748, with a total registered capital of USD 318722.62, an average of USD 12.878 million per project In particular, the period from 1988 to 1991 number of FDI projects attracted 363 projects with a total registered investment capital of about 2,895 million USD, on average each project is about 7,875 million USD However, until 1991, the newly registered capital amount was 329 million USD, quite small compared to the total registered capital The period from 1992 to 1994 Vietnam attracted a large number of investment projects, in particular: in this period, Vietnam attracted 842 projects, with total registered and increased capital of about 9.434 billion USD, On average, each project reached 11.2 million USD, the average capital growth rate reached 50%, the disbursed capital reached 3,634 billion USD (accounting for 38.52% of registered capital) Period from 1995 to 2000 In the world, developed countries tend to increase investment in emerging and transforming economies such as Vietnam and Eastern Europe However, since 1997, due to the Asian financial crisis began to adversely affect the offshore investment activities of Asian investors, which are major investors of Vietnam Period from 2001 to 2007: has attracted 6466 FDI projects, with a total registered and increased capital of 54,073 billion USD, an average of each project is 8.36 million USD Disbursed capital reached nearly 50% of the total registered capital The period from 2008 to 2011 2008 was the most successful year of Vietnam in attracting FDI when the number of registered projects reached a record of 1,557 projects, the highest registered capital up to this stage with the number of 71,726 billion USD and disbursement reached 11.5 billion USD In the period of 2012 - 2017, the total FDI projects attracted 11822 projects, with registered capital reaching USD 143.638 billion, an average project of USD 12.15 million, disbursement reached USD 81.874 billion, accounting for 57% of registered capital 3.1.2 Investment form FDI in Vietnam exists in different forms, including: 100% foreign-owned enterprises; joint venture; BOT, BT and BTO contracts; contract of business cooperation; joint-stock companies and parent-child companies Most foreign investors who invest in Vietnam want to establish 100% foreign-owned enterprises, BOT, BT and BTO forms are quite few foreign investors registering even though the Government of Vietnam is encourage these forms, especially for infrastructure construction projects 3.1.3 Investment partner Vietnam has attracted investment from thousands of corporations and enterprises from 125 countries and territories, mainly from Asian countries such as Japan, S.Korea, Singapore, Hong Kong and ASEAN (where technology is not high) accounts for about 75% of total FDI While FDI from developed countries like the US, EU, Japan is not high 3.1.4 Investment areas 13 Vietnam economy to gradually increase again In 2016, Vietnam GDP reached 6.43%, 2017 increased to 6.81% 3.2.1.2 Inflation fluctuations The period 1991-1995 witnessed a strong fluctuation of inflation when from very high (81.8% in 1991) to a low of 8.4% in 1993 and then increased to 16.9% in 1995 Since 19961998 showed that inflation had uneven fluctuations but then stabilized below 10% From 1999 to 2000, the situation of inflation fell sharply, falling to the lowest, even in 2000 inflation was down to 1.71% In the period of 2000 - 2006 (before Vietnam joined the WTO), Vietnam's inflation was relatively stable at one-digit level, this is the period of world and Vietnam economic growth stable and high level economic growth momentum The period of inflation fluctuates the most from 2007 to 2012, inflation increases and decreases with a big difference between the previous year and the following year Since 2012, the Government of Vietnam has strengthened measures to curb inflation and boost economic growth, so inflation is maintained at a low level In addition, the economic situation has been restored, prices of some strategic commodities have dropped sharply, especially oil, making the overall price level better controlled and inflation under control 3.2.1.3 Fluctuations of the budget deficit For 27 consecutive years, Vietnam has a budget deficit, between 2000 and 2005, although the budget deficit is at a safe level, but close to the permitted level (5%), from 2006 - now and deeply Budget deficits continue to increase, despite significant improvements This is a potential manifestation of macroeconomic changes, especially in the period of 2007 2011 and 2012 - 2016 3.2.1.4 Exchange rate fluctuations The exchange rate of Vietnam Dong and US Dollar increased sharply, especially in the period of 1990 - 1994 and 1996 - 1999, corresponding to the fluctuations of the world economy, adjusting the monetary policy of Vietnam in the average stabilizing inflation and promoting growth 3.2.2 Macroeconomic volatility of Vietnam through MII index To quantify the macroeconomic situation of Vietnam in the period 1991 - 2017, the thesis uses MII formula as proposed by Ismihan et al (2002), specifically: 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 2014Q1 2015Q1 2016Q1 2017Q1 0.7 0.6 0.5 0.4 0.3 0.2 0.1 Figure 3.1 Index of macroeconomic instability of Vietnam in the period 1991 - 2017 Table 3.1 Proportion of component indicators in MII (%) Exchange Foreign Budget Period Inflation Total rate Debt/GNP deficit/GNP 100% 1991-1994 6,66% 43,54% 34,58 % 15,22% 100% 1995-1998 14,84% 43,75% 14,27 % 27,14% 1999-2000 18,64% 31,28% 7,14 % 42,94% 100% 14 2001-2006 2007-2013 2014-2017 23,27% 41,16% 24,94% 25,51% 11,03% 10,15% 1,83 % 1,62 % 1,29% 100% 49,39% 100% 46,19% 63,62% 100% Source: Author calculate 3.3 The relationship between FDI and Vietnam's macroeconomic fluctuations 3.3.1 The relationship between FDI and fluctuations in GDP According to the Ministry of Planning and Investment, the contribution of FDI to GDP continues to increase, in 1992 the contribution rate of FDI in GDP was 2%, to 1995 reached 6.3%, in 2000 reached 12.7%, The whole period of 2001-2005 averaged 14.5%, the average period of 2006 - 2011 reached 16.43% and the period of 2012 - 2016 reached an average of 17.59% However, the reality shows that this capital source focuses on projects of "processing" type, the value-added ratio of these projects is not superior corresponding to capital This reduces the quality of growth According to the formula GDP = NX + G + C + I (NX = Export - Import, G: government spending, C: consumption; I: social investment) In this study, the impact of FDI on GDP through aggregate demand is reflected in the contribution of FDI to total investment and trade balance 3.3.2 The relationship between FDI and inflation fluctuations In the period 1995-1999, 2002-2003, 2006 - 2011, the direction of implemented FDI and CPI in the same direction increased, the rest of the other periods were reversed (FDI increased, CPI decreased) Analysis of the relationship between FDI and CPI in Vietnam can analyze the transmission channel of the impact of FDI on the cause of inflation, including analyzing the impact of FDI on money supply M2 and impact on demand causing phenomena dual bridges and push costs 3.3.3 The relationship between FDI and exchange rate fluctuations The factor that directly affects the exchange rate in Vietnam is the supply and demand for money, but it affects the supply and demand of this currency due to factors such as: inflation and interest rate differences between the two countries; deficit / balance of payment surplus; the situation of economic growth and recession; Psychological factors and speculative activities Among these causes, FDI has an impact on Vietnam's inflation and payment balance, which has an impact on exchange rate fluctuations Impact on inflation has been presented above As for the impact on the balance of payments, which affects the current account and capital account as follows: (1) Impact on current account: BoT is part of the current account, in the trade balance (BoT) of FDI is always greater than current account, thus concluding FDI contributes to limiting the current account deficit, increasing the balance of payments, affecting Vietnam's exchange rate (2) Impact on capital account: FDI implementation is 01 component of the capital account, the contribution of realized FDI to capital accounts increases steadily over the years and only in 2007, 2008 FDI value implementation is lower than capital account, all other years are higher Therefore, in this channel, FDI has a positive impact on the balance of payments, thereby affecting exchange rate fluctuations 3.3.4 FDI relations and fluctuations of budget deficits According to the formula: Budget balance = Budget revenue - Budget expenditure In particular, if the budget is larger than the budget revenue, it is called the "budget deficit" FDI affects budget deficits, often known to have an impact on budget revenue Vietnam budget has 27 consecutive years of deficit and impact of many factors, including FDI, while FDI enterprises have contributed significantly to Vietnam's state budget revenue in the period 2001 - 2017, the level of increase steadily over the years, contributing to increasing budget 15 16 revenue, limiting Vietnam's budget deficit According to GSO statistics, in the period of 19942000, the value of budget remittance of FDI enterprises reached 1.8 billion USD, then increased to 14.2 billion USD in the period 2001 - 2010 and to 23.7 billion USD In the period of 2011 - 2015, in 2017 alone, FDI enterprises paid billion USD to the budget, accounting for 14.46% of the total state budget revenue in 2017 However, the level of state budget contribution of FDI enterprises is limited, with a close Average contribution in the period 2001 - 2017 reached 10.49%, while state-owned enterprises contributed 17.89%, private sector contributed 10.3% 4.2 Establishing model The model to assess the impact of FDI on macroeconomic instability is as follows: LnMIIt = α0 + α1LnOPEt + α2LnCPIt + α3LnFDIt + α4LnM2t + α5LnEXRt + et (1) The model of assessing the impact of FDI on GDP is as follows: LnGDPt = α0 + α1LnIMPORTt + α2LnEXPORTt + α3LnFDIt + α4LnEMPt + et (2) For inflation, the model for assessing the impact of FDI on CPI takes the form: LnCPIt = α0 + α1LnM2t + α2LnFDIt + α3LnEXRt + et (3) The model of assessing the impact of FDI on the exchange rate is as follows: LnEXRt = α0 + α1LnOPEt + α2LnFDIt + α3LnERVt + et (4) In which: LnMII: Logarithm the natural base of macroeconomic instability; LnEXR: Logarithm of natural bases of exchange rates; LnFDI: Logarithms the natural base of the value of foreign direct investment; LnERV: Logarithm of natural base of foreign exchange reserves; LnOPE: Logarithm the natural base of the openness of the economy; LnGDP: Logarithm of the natural base of the value of gross domestic product; LnFDI: Logarithms the natural base of the value of foreign direct investment; LnEXPORT: Logarithm of the natural base of export value; LnIMPORT: Logarithm of natural numbers of Import values; LnEMP: Logarithm of natural base of labor value; LnCPI: Natural logarithm of consumer price index; LnM2: Logarithm of the natural base of money supply M2 4.3 Impact assessment method From the research overview and current situation of macroeconomic changes in Vietnam in the period of 1991 - 2017, the thesis selected the process of assessing the impact of FDI on Vietnam's macroeconomic changes through the use of Eview software 8.0 according to the following steps: Step 1: Using stationaruty test method with Augmented Dickey Fuller test (ADF) test to test stationaruty of each series of data described to perform regression for quantitative analysis The model for ADF is: CHAPTER IMPACT OF FOREIGN DIRECT INVESTMENT ON VIETNAM'S MACROECONOMIC FLUCTUATIONS 4.1 Description of data Data used in this study were taken quarterly from the Q4 of 1991 - to the Q4 of 2017, specifically as follows: - Foreign direct investment (FDI): This index is taken from GSO, unit: Million USD This is the actual FDI data deployed in registered projects - Gross domestic product (GDP): source: GSO, unit: USD million This is the actual GDP data, reflecting Vietnam's economic growth over the quarters and years from 1991 to 2017 This value is calculated based on the consumption approach: GDP = I + C + G + NX (I: total investment, C: consumer spending; G: government spending; NX = X (export) - M (import)) The actual GDP value, not the value, is calculated by the general parity method (PPP) - Export (EXPORT): source: GSO, unit: Million USD Export value is the export price multiplied by the total export order, this index reflects the value of Vietnam's exports (excluding service exports) abroad in the 1991 - 2017 period - Import (IMPORT): source: GSO, unit: Million USD Import value is the import price multiplied by the import order, this index reflects the value of Vietnam's imports from foreign countries in the period 1991 - 2017 - Macroeconomic instability (MII): This index is calculated in chapter (section 3.2.2) based on the formula proposed by Ismihan et al (2002) based on macroeconomic variables Single tissue includes: Inflation rate, foreign debt / GNP, budget deficit / GNP and exchange rate - Openness of the economy (OPE): This index is calculated according to the formula: Openness of the economy = (Export + Import) / GDP In particular, the value of exports, imports and GDP are taken from the above data - Consumer price index (CPI): source: IFS-IMF, reflecting the level of consumer price increase in each period, thereby reflecting the level of inflation of the economy - Exchange rate (EXR): This data is taken from IFS-IMF, this is the nominal exchange rate between USD / VND in each period - Foreign exchange reserves (ERV): Data source from IFS-IMF, unit: Million USD - Money supply M2 (M2): data source from IFS-IMF, single unit: Million USD - Labor source (EMP): This data is taken from GSO, the position: million people This is the number of people in the working age of Vietnam Depending on the different models, the data will be converted to natural base Log format to perform regression impact assessment The results of the data description show that the data used for this analysis are reliable k ΔYt = α0 + βyt-1 +  µ j Δyt-j + εt (1) j =1 k ΔYt = α0 + δt + βyt-1 +  µ j Δyt-j + εt (2) j =1 In which Δyt-1 = yt – yt-1; Yt : Data series according to the time being considered; k : Length of delay; εt : White noise The model (2) has an additional trend variable on time t (this is a variable with the value of 1-n, is the first observation representation, n is the last observed representation of the data series White noise showing random errors arising from classical assumptions that there is an average value of 0, since the variance is constant and not autocorrelated, the thesis will test model (1) and ( 2) via Eview software with hypothesis hypothesis: H0: β = (yt is a non-stop data string); H1: β