tiểu luận kinh tế lượng HOW EXPORT AND FDI AFFECTS IMPORT IN VIET NAM (1986 2018)

FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS -*** ECONOMETRICS REPORT HOW EXPORT AND FDI AFFECTS IMPORT IN VIET NAM (1986-2018) Group 7: Nguyễn Trọng Khoa Trần Thị Ngọc Diệu Trương Cơng Tồn Lecturer: PhD Từ Thuý Anh Hanoi, 10/2019 TABLE OF CONTENTS I Introduction II Literature Review III Theoretical background IV Econometric model V Data collection Data overview Data description VI Estimation of econometric model Checking the correlation among variables Regression run Testing Solution 13 VII Conclusion 14 VIII References 16 2 I INTRODUCTION As much as Economy is a meaningful science that determines the social development in general and national growth in particular, Econometrics is the use of statistical techniques to understand those issues and test theories Without evidence, economic theories are abstract and might have no bearing on reality (even if they are completely rigorous) Econometrics is a set of tools we can use to confront theory with real-world data Since its inception, econometrics has provided economists with a sharp instrument for measuring economic relations As economics students, we recognize the need to study and learn about Econometrics in logical and problem analysis To better understand how to put the Econometrics into reality and to apply the Econometrics effectively and correctly, our team would like to develop the econometrics report under the guidance of PhD Tu Thuy Anh In this report, we used the econometric analysis tool Gretl to analyze the topic "How Export and FDI affect Import in Vietnam in the period of 1986-2018" To the extent of purpose and resources, there are still deficiencies in this report, but we look forward to providing readers with a decent view of the overall of the data set given and the knowledge that we have gained through PhD Tu Thuy Anh’s Econometrics course II LITERATURE REVIEW Globalization and international economic integration are indispensable trends of all countries in the world today With the accession to world economic organizations and especially becoming an official membership of the World Trade Organization (WTO), Vietnam has been actively participating in this trend The World Trade Organization is the biggest trade organization in the world, accounting for nearly 90% of world trade Joining the WTO is participating in the common playing field of the world market, promoting trade and investment promotion Firmly integrated into international economic relations, Vietnam has an opportunity to expand exports of goods in which the country has strengths Thanks to the high export of mourning, it helped to increase the amount of foreign currency for 3 import, boosting the increase of imports Along with the increase of international trade, FDI has also increased, creating new industries and products to diversify the domestic market, reducing imported goods from foreign, contributing to improving the balance of international payments Thus, it is essential to understand and evaluate the actual import, export and foreign direct investment of FDI in Vietnam in the current context of the economy III THEORETICAL BACKGROUND From 1986 up to now, Vietnam has adapted various innovative economic strategies and the Sixth Party Congress (December,1986) was considered as the basic turning-point of the Socialism in Vietnam with the introduction of guidelines for the comprehensive renovation of our country in terms of thoughts, organizational and personnel structure, administrative system, economic system, political system and other fields in the society The initiative launched in 1986 should be considered as a milestone for the transition from centrally-planned economy to socialist-oriented market economy together with a range of social, political and economical changes in Vietnam The private production and business innovative idea was the general breakthrough since 1986 up to now With the application of “Khoan 100”, “khoan 10” in agricultural sector; “market price structure” economic sector or Vietnam would like to be friend of all nations and territories in the world in foreign policy, Vietnam has gradually established and expanded import-export markets and trade partners in the direction of multilateral relationships The successes of Vietnam’s foreign trade are showed by statiscal figures in the five year periods of development during 1986-2018 The average of total merchandise trade from 1986-2018 is 103.626 billion USD In each period, the growth rate is quite high For example, the growth rate in the period of 1996-2000 tripled compared to that of the previous period, reaching approximate 100 billion USD (the average growth rate is 17,2 percent) regards to the period of 2001-2005, the growth rate almost doubled compared to that of the previous period, at 241 billion USD (The average growth rate is 18.2 percent) Of which, domestic economic sector in the 1986-1990 period played the most important role, making up 96.6 percent f total trade From 1986 to 2018, export value increases from 789 million 4 USD to 243,483 million USD and import value increases from 2.155 Billion USD in 1986 up to 236.687 billion USD in 2018, which is approximately 115th-fold increase only.the average growth rate of import value in 1991-1995 is the highest, at 127.3 percent Foreign direct investment (FDI) is an important source of capital to supplement the total investment capital for economic growth of each country, including Vietnam Since the Law on Foreign Investment was adopted in 1987, Vietnam has attracted a large amount of foreign capital, and this capital inflow has made important contributions to economic development Since 1986, Vietnam has undertaken a comprehensive renovation of the country Compared to reform and transition from a planned economy to a market economy in other countries, innovation in Vietnam has its own characteristics Innovation in Vietnam takes place in two dimensions: "from the bottom up" in cooperatives, enterprises and "top down" means the decisions of the Party and the State Relationship bidirectional for the renovation in Vietnam took place without conflict between "top" and "bottom", nor the "shock" is too strong to be created by the tough policies and measures and the willpower of the "top" leadership This is a remarkable feature of the process of innovation in Vietnam, both the top-down leadership and the creativity of the people from below Therefore, innovation has led to success This study aims to find relationships between exports, import, and FDI in the period 1986 - 2018 The results show that there is a long and significant relationship between investment and exports with total domestic output at a 95% confidence level IV ECONOMETRIC MODEL To demonstrate the relationship between Import and other factors, the regression function can be constructed as follows: The Population regression function is set up: The Sample regression function is set up: 5 where: β0 is the intercept of the regression model βi is the slope coefficient of the independent variable xi u is the disturbance of the regression model is the estimator of β0 is the estimator of βi From this model, this report is interested in explaining Import in terms of Export and FDI V DATA COLLECTION Data overview This set of data is a secondary one, as they are collected from a given source Data source: The World Bank, General Statistics Office of Viet Nam The structure of Economic data: Time series data Data description Function we have in this report will include these following variables: - Dependent variable: Import – The import of Vietnam from 1986 to 2018 (USD Million) - Independent variables: Export – The export of Vietnam from 1986 to 2018 (USD Million) FDI – Foreign Direct Investment net inflows from 1986 to 2018 (USD Million) Exhibit 1: Statistic indicators of variables in the model where: S.D is the standard deviation of the variable Min is the minimum value of the variable Max is the maximum value of the variable 6 VI ESTIMATION OF ECONOMETRIC MODEL Checking the correlation among variables First of all, the correlation of l_Import, Export and FDI is checked by calculating the correlation coefficient among these variables The correlation coefficient measures the strength and direction of a linear relationship between two variables Exhibit 2: Correlation Matrix for Log – linear Model: As we can see: + Import is directly proportional to Export The set standard between these two variables is quite high + Import is directly proportional to FDI The set standard between these two variables is quite high Regression run Exhibit 3: Regression model 7 Equation of regression: Data explanation: : When all the independent variables are zero, the expected value of Import is 8.74558 (USD Million) : When Export increases by (USD Million), keeping the value of FDI constant, the Expected value of Import increases by % : When FDI increases by (USD Million), keeping the value of Export constant, the Expected value of Import increases by 0.00372087% The coefficient of determination R2: - In our results, we can see R2 which indicates that the model explains all the variability of the response data around its mean - That R2 = 0.723195 is quite high, which suggests that the model is good fit, which means 70.5324 % of the sample variation in the percentage vote for dependent variable (Import) is explained by the changes in the independent variables (Export, FDI) Testing 3.1 Testing hypothesis 3.1.1 Testing an individual regression coefficient Purpose: Test for the statistical significance or the effect of independent variables on dependent one We have: α = 0.05 Testing the Export: Given that the hypothesis is: We see: P-value of Export is 0.000000226 < 0.05 → Reject H → The coefficient β2 is statistically significant at the 5% significance level Testing the FDI: Given that the hypothesis is: We see: 8 P-value of FDI is 0.0048 < 0.05 → Reject H → The coefficient β3 is statistically significant at the 5% significance level 3.1.2 Testing the overall significance Purpose: Test the null hypothesis stating that none of the explanatory variables has an effect on the dependent variable We have: α = 0.05 Given that the hypothesis is: We have: P-value(F) = 4.29153e-09 < α= 0.05 → Reject H 0→ All parameters are not simultaneously equal to zero → At least one variable has an effect on dependent one → At the 5% significance level, the model is statistically fitted 3.2 Testing the model’s problem 3.2.1 Testing Omit variable Given that the hypothesis is: Ramsey’s RESET: Exhibit 4: Ramsey’s RESET We see: p-value = P(F(2,28) > 13.4917) = 7.89e-05 < α = 0,05 → Reject H → The model omits variable 3.2.2 Testing multicollinearity 9 Multicollinearity is the high degree of correlation amongst the explanatory variables, which may make it difficult to separate out the effects of the individual regressors, standard errors may be overestimated and t-value depressed The problem of Multicollinearity can be detected by examining the correlation matrix of regressors and carry out auxiliary regressions amongst them Using the following command vif regression to examine multicollinearity VIF commands specific to the variance inflation factor, if VIF is greater than 10, you have high multicollinearity and the variation will seem larger and the factor will appear to be more influential than it is If VIF is closer to 1, then the model is much stronger, as the factors are not impacted by correlation with other factors Exhibit 5: Multicollinearity test We see: VIF (Export) = 1.149 < 10 VIF (FDI) = 1.149 < 10 →At the 5% significance level, the model does not contain perfect multicollinearity 10 10 3.2.3 Testing Heteroskedasticity Heteroskedasticity indicates that the variance of the error term is not constant, which makes the least squares results no longer efficient and t tests and F tests results may be misleading The problem of Heteroskedasticity can be detected by plotting the residuals against each of the regressors, most popularly the White’s test It can be remedied by prespecifying the model look for other missing variables Given that the hypothesis is: White’s test: Exhibit 6: Heteroskedasticity test We see: p-value = P(Chi-square(5) > 14.792439) = 0.011287 < α = 0.05 →At the 5% significance level, there is enough evidence to reject H and conclude that this set of data meets the problem of Heteroskedasticity 3.2.4 Testing normality of residual 11 11 In statistics, normality tests are used to determine if a data set is well-modeled by a normal distribution and to compute how likely it is for a random variable underlying the data set to be normally distributed Given that the hypothesis is: Using normality of residual in Gretl: Graph 1: Normality of residual test We see: Chi-square(2) = 4.110 with p-value 0.1281 > α = 0.05 12 12 → At the 5% significance level, the model has normality Even the u does not come from a normal distribution parameters estimates will be asymptotically normal according to Central Limit Theorem 3.2.5 Testing autocorrelation Autocorrelation can be defined as correlation between the variables of some observations at different points of time Given that the hypothesis is: Using autocorrelation (Breasch-Godfrey test) in Gretl: Exhibit 7: Breasch-Godfrey test We see: p-value = 0.0003 < α = 0.05 → At the 5% significance level, the model not have autocorrelation Solution Correcting Omit variable 13 13 After reviewing a number of papers of other authors, we found that the model may lack some of the following variables: Population growth rate, Government spending, Money supply… However, due to the limited time and capacity to collect information, the data of the missing variables could not be collected This is a weakness of the model, so it will need to be overcome in the future to bring better efficiency Correcting Heteroskedasticity In a well-fitted model, there should be no pattern to the residuals plotted against the fitted values - something not true of our model Ignoring the outliers at the top center of the graph, we see curvature in the pattern of the residuals, suggesting a violation of the assumption that price is linear in our independent variables We might also have seen increasing or decreasing variation in the residuals— heteroskedasticity To fix the problem, robust standard errors are used to relax the assumption that errors are both independent and identically distributed Exhibit 8: Regression model using robust standard errors Note that comparing the results with the earlier regression, none of the coefficient estimates changed, but the standard errors and hence the t values are different, which gives reasonably more accurate p values 14 14 Exhibit 8: Correcting heteroskedasticity Still, At the 5% significance level, the model after using Robust standard errors meets the problem of heteroskedasticity VII Conclusion Our research is analyzed and has focused on the factors that possibly affect Import of Vietnam from 1986 to 2018 After giving hypotheses, comparing with some related research results as well as analyzing the data collected, we came to conclusion with some key findings below: Assuming other factors holding constant, we have: Export and FDI contributing to the Import of Vietnam But there are many other factors that affect Import such as GDP Lastly, there are a large number of ways to conduct this research even deeper and arrive at even more important, perhaps not-yet-uncovered conclusions In terms of the conclusions for this project, a deeper analysis might also be able to uncover any spillover effects that could go on to affect Import of Vietnam more Again, due to the limitation of understanding and resources, our report may contain misinterpretations We hope that Ms Tu Thuy Anh and readers can give us constructive comments on the report so that we would improve ourselves and better in the future 15 15 16 16 VIII References The relationships between, GDP, FDI, Import and Export in Vietnam after 30 years Reforms - Do Thi Thao (http://www.iosrjournals.org/iosr-jef/papers/Vol9-Issue3/Version-2/J0903026773.pdf? fbclid=IwAR048679I19SgIGNhpvmpdHCHqpc5EIBp1GUMzanKHx3T4KhJHIcwE1DRs) 17 17 ... participating in the common playing field of the world market, promoting trade and investment promotion Firmly integrated into international economic relations, Vietnam has an opportunity to expand exports... sector or Vietnam would like to be friend of all nations and territories in the world in foreign policy, Vietnam has gradually established and expanded import -export markets and trade partners in the... improving the balance of international payments Thus, it is essential to understand and evaluate the actual import, export and foreign direct investment of FDI in Vietnam in the current context