Determinants of bilateral export flows in the world economic integration process, the case of Vietnam (1986-2010): A gravity approach
Creators: name: Nguyen, Tri Tung
Publisher: name: RMIT University
Year: 2024

description: The volume of international trade flows has likely significantly increased, and to address the determinants of international trade is one of major concerns amongst trade economists. This is also the case for Vietnam, a nation which has been in transition, as it integrated into the global economy through trade whilst moving from a command to a market economy in the last three decades, and has experienced a significant increase in international trade activities.<br><br>Trade and world economic integration are seen as the impetus for accelerating the well-beings of the domestic Vietnamese communities and international community in the region. However, an understanding of the link between trade and economic integration from the perspective of Vietnam is missing. Empirical studies on Vietnamese trade are in lack to address these determinants (see, Le, 1996; Nguyen, 2010). This thesis identifies the key factors that have driven the impressive growth of Vietnamese exports during the world economic integration process (1986-2010). Importantly, this study applies the gravity equation to investigate these factors by the two aspects, namely, the aggregate and sectoral exports analysis.<br><br>The gravity equation has been frequently applied in empirical studies to examine bilateral trade flows. I make use of this equation in addressing the key determinants of Vietnamese export flows. The applied models for Vietnamese exports are based on Frankle (1993). This study focuses on a large sample of 54 main trading partners of Vietnam over a 25 year period. This large sample is divided into different country groups with two categories: income and regional basis, which provides important insights on how the trade policy should look like by different trading partners. For sectoral analysis, 24 key exporting sectors are selected.<br><br>The aggregate bilateral gravity models introduce useful information to explain the determinants of bilateral exports of Vietnam. Generally, such factors as economies of scale, economic development, exchange rate, domestic openness, trade costs, and regional trade agreements (the memberships of ASEAN and APEC) are found to significantly contribute to the performance of total bilateral exports. However, the results suggest that openness of trading partners has not been always beneficial for total exports of Vietnam. Similarly, the WTO membership tends to divert Vietnam’s bilateral exports to non-member trading partners for most country panels. Additionally, a comparison of Vietnam and Singapore (an Asian country that is economically better positioned than Vietnam) is carried out using the same models. I found that both results are rather consistent.<br><br>The outcomes of sectoral estimations address the key determinants by accounting for the bilateral exports for a large number of key export sectors. The results confirm important roles of economic sizes, economic development, endowment difference, domestic openness, bilateral exchange rate, trade costs, the ASEAN and APEC trade arrangements in determining sectoral bilateral exports of Vietnam. However, the sectoral study also points out that the influence of some gravity variables, such as foreign openness or WTO trade preference, are not in line with the thesis’ hypothesis. These results are consistent to those from the aggregate analysis.<br><br>