JED, Vol. 21, Special Issue, 2019, pp. 5-22
Impact of Globalization on Industrial Development in Vietnam: Evidence from Time Series Analysis
Abstract:This study aims at investigating the impact of globalization on industrial development in
Vietnam. Empirical analysis is done by using time series data for the period from 1995 to 2015.
The paper tested the stationary, cointegration of time series data and utilized error correction
modeling technique to determine the short-term relationships among industry value added,
globalization, foreign direct investment, balance of trade, exchange rate and reserves variables.
The results show that globalization, measured by the KOF index, promotes industrial development
and that Vietnam has gained from integrating into the global economy. The overall index of
globalization has positively and significantly impacted on the industrial development in Vietnam
in the short run as well as in the long run. The results also indicate that foreign direct investment
has had a massive effect on the development of the Vietnamese industrial sector in the long run.
The study further reveals that balance of trade has affected industrial development positively in
the long run. Moreover, the exchange rate was found to be positively influential toward industrial
development in the long run but it has had a negative effect on the industrial sector in the short
run. In addition, reserves have negatively affected industrial performance in the long run but have
had an insignificant impact in the short run.
Keywords:Exchange rate; foreign direct investment; industrial development; globalization; trade balance.