Determinants of bilateral trade flows of Vietnam: evidence from panel fixed effects estimation approaches

Le Trung Ngoc Phat1, Nguyen Kim Hanh1
1 School of Economics, Can Tho University, Can Tho, Vietnam

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Abstract

This study aims to investigate the determinants of bilateral trade flows of Vietnam. The panel fixed effects estimation using Driscoll and Kraay standard errors and panel fixed effects twostage least squares approach are employed to analyze a balanced panel data, which includes fifty-three countries that have been continuously trading with Vietnam from 1997 to 2019. The estimated results reveal that free trade agreements have a positive effect on the bilateral trade flows in trading with the developed or developing countries. Additionally, the bilateral trade flows between Vietnam and the developed countries are enhanced by the differences in income level. They are, however, impeded by the institutional distance and transportation cost. In the case of trading with the developing countries, transportation cost and exchange rate have a positive impact on the bilateral trade flows. The study provides some crucial policy implications for policymakers involving international trading activities in developing countries such as Vietnam.

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