Graduate School of International Studies Ajou University
The two – way linkage relationship between foreign direct investment (FDI) and economic growth is still in debate. Many existing papers have looked deep insights into this relationship in a number of developing country, some of them have considered the case of Vietnam. By using panel dataset at provincial level which covers 63 cities/provinces of Vietnam over the period 2000–2010, this paper aims to study the 2 way linkage relationships between the economic growth and FDI and other related variables. The Durbin – Wu – Hausman test for endogeneity has been taken and it shows that there are no endogeneity problems in assessing the effects of economic growth on FDI and vice – versa. The augmented Dickey – Fuller test for unit root test is also applied to test for stationary. Test results for heteroskedasticity and serial correlation show that heteroskedasticity and serial correlation present, however they are not severe problems. The regression results suggest that there exist significant positive two – way causal relations between economic growth and FDI in Vietnam.