Determinants of Vietnam’s exports: An application of the gravity model

Abstract

The success of exports in Vietnam has become a driving force for economic growth since the reform in 1986. The paper uses data from 2010 to 2014 to estimate the gravity model for Vietnam’s exports with the random effect estimation. The empirical results show that the bilateral trade of Vietnam is positively associated with the country’s GDP and importing countries’ GDP. Furthermore, it has a negative relationship with distance from Vietnam to trading partners. These results are akin to those of the previous studies of the gravity model. Particularly, foreign direct investment, border effects and exchange rate play a significant role in promoting exports of Vietnam. Besides, the deepened integration into the region and world market also has significant impacts on expanding exports of Vietnam. Therefore, these factors have contributed to explaining the success in exports of Vietnam over the past few years.