tiểu luận kinh tế lượng SOME FACTORS AFFECTING GDP VIETNAM DURING 1995 2011

I.The reason for choosing the topic Total gross domestic product GDP is a basic norm which reflects the economicgrowth, economic scale, level of economic development per capita, economic

FOREIGN TRADE UNIVERSITYFACULTY OF INTERNATIONAL ECONOMICS

TABLE OF CONTENTS

INTRODUCTION 4

I.The reason for choosing the topic 4

II.Objectives of the study 4

III Scope of the study 4

IV Structure of the study 4

LITERATURE REVIEW 6

THEORY BACKGROUND 8

I.Definition 8

1, Gross domestic product (GDP) 8

2, Export 9

3, Import 10

4, Investment 11

II.The origin of model from theory 11

III.The theory put variables into model 14

DESCREPTIVE STATISTICS OF DATA 15

I.Statistical Description 15

II.Correlation Description 16

ECOMETRICS MODEL 17

I.Buiding multiple regression model 17

II.Running multiple regression model: 17

III.Regression model analysis 18

ROBUSTNESS CHECK 19

FINDING & DISCUSSION 27

I.Finding 27

II.Discussion 27

CONCLUSION 28

REFERENCE 29

APPENDIX 30

I.The reason for choosing the topic

Total gross domestic product (GDP) is a basic norm which reflects the economicgrowth, economic scale, level of economic development per capita, economic structureand the transformation of price level of a country Therefore, GDP is an important tool,commonly used around the world to examine the development and changes in thenational economy Accurate perception and rational use of this indicator have importantimplications in the survey and evaluation for developmental, sustainable, comprehensiveeconomy Any countries would also like to maintain a growing economy along with themonetary stability and occupations for residents, so GDP is one of the specific signal forthe efforts of the government Thus the study of the tendency of growth of GDP, somefactors affecting GDP can help government change the policies to achieve theseobjectives in order to promote economic growth This is the macro issues that someoneworking in the field of economics are concerned That's why our group decided to study

the subject: “ Some factors affecting GDP Vietnam during 1995-2011”.

II.Objectives of the study

Investigate the influence of three factors: Investment, Export, Import, on GDP in theperiod 1995-2011

III Scope of the study

Total investment, total export, total import and total GDP of Vietnam from 1995 to2011

IV Structure of the study

1 Literature Review

2 Theory Background

3 Descriptive Statistics of Data

5 Robustness Check

6 Finding & Discussion

7 Conclusion

LITERATURE REVIEW

1 “Factors affecting GDP of Ho Chi Minh City”

The subject was about the impact of some factors on GDP of Ho Chi Minh City Itincludes: human resources, investment, exports, imports Through the survey results, thestudy concluded that only the total investment value had a direct effect on GDP in Ho ChiMinh City Human resources, total value of exports, imports did not really affect GDP.From the verified result demonstrated that the regression model was appropriate foreconomic theory, the explanatory variables were 99.52% of the fluctuation to GDP of HoChi Minh City

2 “ The influence of total value of export and import, population, CPI, inflation rate

on GDP during 1990-2009”

The research gave information about some aspects encompassing export, import,population, CPI and inflation rate between 1990 and 2009 Export, import and populationhad an impact on GDP Three factors determined 99.8184% of the volatility of GDP

3 “Analyzing the impact of FDI, export, import, population on GDP”

The regression model in this research has shown the great influence of FDI, export,import and population on GDP Especially, population is a huge promotion However, ifincrease GDP based on only population, it will cause bad consequences and have anegative impact on the long-term orientation Therefore, the study concluded that do notfocus on population but should focus on export to be sustainable development

4 “Relationship between Export and GDP”

The research has shown that the impact of light industrial and handicraft exports onGDP is most obvious With 95% reliability, other factors remained constant, if exports oflight industry and small scale industry increased by US $1 billion, the average value ofGDP increased from 24,614 to 90,032 hundred billion VND

It is estimated that the change in agricultural and fishery export value does not affectGDP, so if we keep other factors and increase exports of agricultural or fishery products,economic growth will not be made.

5 “ Analyzing the influence of FDI on GDP”

Foreign direct investment (FDI) actually affected GDP in the period 1995-2010 with95% reliability The study also suggested some recommendations to promote GDPgrowth: Expanding the investment market, opening the commodity market; Simpleadministrative procedures; Loosen monetary and fiscal policies; Incentives and incentivesfor investment in industries with high levels of gray matter; Reasonable allocation ofinvestment capital by sectors and regions

However, in the articles which has already studied, there has not been any research onthe problem that our group are doing below

THEORY BACKGROUND

In most countries, regardless of political orientation, each country has its ownstrategy for social - economic development Economic growth and development is thefirst target of all countries over the world, a key measure of progress in each period of acountry Not only a country but also Vietnam always consider economic development as avital duty Economic growth illustrates that the growth rate is higher and more stable in along time, the economy will achieve many great achievements So the more stable incomeand life of the people, the more developed the country will be Therefore, economicdevelopment is considered as an attractive issue in economic research, it is a crucial focus

on the whole economy In order to assess the economy of a country, economists evaluatethrough gross domestic product

I.Definition

1, Gross domestic product (GDP)

a, What is Gross domestic product - GDP

Gross domestic product (GDP) is the monetary value of all the finished goods andservices produced within a country's borders in a specific time period Though GDP isusually calculated on an annual basis, it can be calculated on a quarterly basis as well (inthe United States, for example, the government releases an annualized GDP estimate foreach quarter and also for an entire year)

GDP includes all private and public consumption, government outlays, investments,private inventories, paid-in construction costs and the foreign balance of trade (exports

are added, imports are subtracted) Put simply, GDP is a broad measurement of a nation’soverall economic activity It may be contrasted with gross national product (GNP), whichmeasures a the overall production of an economy's citizens, including those living abroad,while domestic production by foreigners is excluded

b, The significance of Gross domestic product

Businesses can also use GDP as a guide to decide how best to expand or contract theirproduction and other business activities And investors also watch GDP since it provides aframework for investment decision-making The "corporate profits" and "inventory" data

in the GDP report are a great resource for equity investors, as both categories show totalgrowth during the period; corporate profits data also displays pre-tax profits, operatingcash flows and breakdowns for all major sectors of the economy

2, Export

a, What is export?

An export is a function of international trade whereby goods produced in one countryare shipped to another country for future sale or trade The sale of such goods adds to theproducing nation's gross output

Exports are one of the oldest forms of economic transfer and occur on a large scalebetween nations that have fewer restrictions on trade, such as tariffs or subsidies Most ofthe largest companies operating in advanced economies derive a substantial portion oftheir annual revenues from exports to other countries The ability to export goods helps aneconomy grow One of the core functions of diplomacy and foreign policy betweengovernments is to foster economic trade for the benefit of all trading parties

Exports are a crucial component of a country’s economy Exports facilitateinternational trade and stimulate domestic economic activity by creating employment,production and revenues

b, Advantages of exporting for companies

Companies export products and services for a variety of reasons Exporting canincrease sales and profits if they reach new markets, and they may even present anopportunity to capture significant global market share Companies that export spreadbusiness risk by diversifying into multiple markets Exporting into foreign markets canoften reduce per-unit costs by expanding operations to meet increased demand Finally,

companies that export into foreign markets gain new knowledge and experience that mayallow the discovery of new technologies, marketing practices and insights into foreigncompetitors.

c, Challenges of exporting

Companies that export are presented with a unique set of challenges Extra costs arelikely to be realized because companies must allocate considerable resources toresearching foreign markets and modifying products to meet local demand andregulations Companies that export are typically exposed to a higher degree of financial

risk Payment collection methods, such as open-account, letter of credit, prepayment and

consignment, are inherently more complex and take longer to process than payments fromdomestic customers

3, Import

a, What is import?

An import is a good or service brought into one country from another The word

"import" is derived from the word "port" since goods are often shipped via boat to foreigncountries Along with exports, imports form the backbone of international trade If thevalue of a country's imports exceeds the value of its exports, the country has a negativebalance of trade

Countries are most likely to import goods that their domestic industries cannotproduce as efficiently or cheaply as the exporting country Countries may also import rawmaterials or commodities that are not available within its borders For example, manycountries import oil because they cannot produce it domestically or cannot produceenough to meet demand Free trade agreements and tariff schedules often dictate whichgoods and materials are less expensive to import

b, What affects import?

The United States' largest trading partners include China, Canada and Mexico Two ofthese countries are involved in the North American Free Trade Agreement that wasimplemented in 1994 and, at the time, created one of the largest free-trade zones in the

world With very few exceptions, this allowed the free movement of goods and materialsbetween the United States, Canada and Mexico.

It is widely believed NAFTA has reduced automotive parts and vehicle manufacturing

in the United States and Canada, with Mexico being the main beneficiary of theagreement within this sector The cost of labor in Mexico is much cheaper than in theUnited States or Canada, pushing automakers to relocate their factories to Mexico

4, Investment

An investment is an asset or item acquired with the goal of generating income orappreciation In an economic sense, an investment is the purchase of goods that are notconsumed today but are used in the future to create wealth In finance, an investment is amonetary asset purchased with the idea that the asset will provide income in the future orwill later be sold at a higher price for a profit

The term "investment" can refer to any mechanism used for generating future income

In the financial sense, this includes the purchase of bonds, stocks or real estate property.Additionally, a constructed building or other facility used to produce goods can be seen as

an investment The production of goods required to produce other goods may also be seen

II.The origin of model from theory

1 Calculation method according to expenditure

This method is calculated by adding up the spending:

GDP=Y=C+I+G+NX

Inside:

- Consumer spending (C): Includes all expenditures for products and services produced and sold by enterprises to households

- Investment expenditure (I): Total investment capital for social development in the period Investment capital for social development includes:

• Capital construction investment includes construction capital, capital forprocurement of equipment, other capital construction, livestock for plowing,breeding

• Capital to increase mobile assets in the period such as increasing inventorybetween the end of the period and the beginning of the year in terms of rawmaterials, materials, finished products and goods in circulation, productsproduced in agricultural and non-agricultural households, and warehouses statereserve

- Government spending on products and services (G) includes expenditures bycentral and local governments These are the costs for defense, administrative,medical, court education, costs to maintain public order, public works, infrastructureconstruction

- Net export (NX) is the difference between export and import of the economy.This is a spending reflecting the economic relationship with foreign countries of thecountry GDP calculated by expenditure method is GDP calculated by market pricebecause the expenditure is paid at market price

2 Calculation method according to income

Under this method, in a simple economy, GDP is calculated by adding up all theincome that the enterprise sector distributes to households in the form of wages, interest,rent and profit

GDP = Y = Salary + interest + rent + profit.

The calculation of GDP by income is also called factor price GDP because theseenterprises pay for the use of resources for production If the economy does not have agovernment, the calculation of GDP at market prices or price factors will give the sameresult But when there is a government, there should be adjustments to GDP based onincome similar to GDP at market prices

The first adjustment is to add indirect tax to income The government receivesincome from indirect taxes, ie taxes levied on services and goods on the market, in whichgovernment subsidies for production are considered to be an indirect tax.

The second adjustment is the addition of depreciation along with earnings Because,when calculating GDP at market price, depreciation has been calculated in investmentexpenditure, while calculation of GDP by income does not include depreciation.Therefore, the formula for calculating GDP when there is a government:

GDP = Total income = Salary + Interest + Rent + Profit + indirect tax +

depreciation.

3.Calculation method according to added value

The value-added method is the sum of all the added value of the economy in a period

Gross domestic product = Added value + import tax

Or GDP = Production value - intermediate cost + import tax

- The added value of the entire economic sector is determined for the whole countryand for each territory and by the total value added of economic sectors and economicsectors

- Added value of each economic sector including:

• Producers' incomes such as salaries and wages (including cash or in kind andpaychecks), deductions for social insurance, health insurance, superior unionpayments, income other than salary, wages

• Production taxes include: Goods tax (excluding import taxes) production taxesand other costs Production tax does not include direct taxes such as income tax,corporate income tax

• Depreciation of fixed assets

• Surplus value

• Mixed income

- The added value of an enterprise is the difference between the output value of theenterprise and the value of the material elements purchased by the enterprise from otherenterprises

III.The theory put variables into model

According to the Dr Nguyen Van Cong, GDP is the total market value of all finalgoods and services produced in a given period The basic factors affecting the growth ofGDP consists of the following key factors:

First, human resources Some people view that as the core of economic growth.People who have health, intellect, qualification, enthusiasm, motivation will be the basicfactor of economic growth

Second, investment In order to produce goods, buy machinery and equipment,expand production scale, improve skills for employees, we need capital investment.Harod Domar stated the relationship between investment and economic growth with theICOR formula, which is the rate of investment increase divided by the rate of GDPgrowth

Third, natural resources Countries with abundant natural resources will beadvantageous conditions for economic development Not only can it be exploited and putinto production, but it can also serve export and purchase necessary goods

Fourth, intellectual technology Science and technology has always been the magickey to open the gate to a tremendous economic growth Science and technology helpsincrease productivity and production efficiency, which can cause a sudden increase inoutput

Last but not least, net exports We live in an open economy, participate in the worldeconomy and have relations with other countries through trade and finance We export thecheapest goods and services manufactured in the country and import other goods thathave cost advantages The gap between exports and imports is net exports Net exportshave a direct impact on economic growth, as it is a part of manufactured goods andservices Increased net exports will boost production of more products

DESCREPTIVE STATISTICS OF DATA

I.Statistical Description

We summarize the data in the following table:

Mean Maximum MinimumGDP 853482.8 2415204 228677Investment (In) 346008.35 877850 72447Export (Ex) 32082.5 96905.7 5448.9Import (Im) 38213.3 106750 8155.4

From the graph, we can see:

+ GDP variable has:

 Minimum value is 228677 billion VND

 Maximum value is 2415204 billion VND

 Average value is 853482.8 billion VND/year