Foreign direct investment, exports and real exchange rate linkages in Vietnam : evidence from a co-integration approach

Several studies, either theoretical or empirical, have analysed the possible connection either between foreign direct investment (FDI) and real exchange rates (RER) or between exports and RER. It is surprising, however, that the triangular relationship between exports, FDI and RER has not been thoroughly investigated. Using data from Vietnam, this paper attempts to fill this gap by econometrically investigating the linkages between these three variables in a co-integration framework. We find, firstly, that RER may directly affect the relative price of export goods and, secondly, that RER indirectly influences Vietnam's exports through FDI. (J SEA Econ/GIGA)