Information Content of Foreign Direct Investment: Evidence from Vietnam
Keywords:
Foreign Direct Investment, Economic Growth, Vector Autoregression Model, VietnamAbstract
This study decomposes the foreign direct investment (FDI) into registered and disbursed values. The difference between the two values reflects the absorption capacity of an economy toward foreign capital flows. Over a quarterly sample from Q1/2007 to Q1/2023 in the Vietnamese economy, the vector autoregressive model with time-varying coefficients (TVC-VAR) is employed to capture the potential changing macroeconomic regime. The evidence suggests that the disbursed FDI has a greater connection with macroeconomic fundamentals, while the registered FDI is more effective in forecasting the value of fundamental variables. Thus, the information content of registered FDI is different from that of disbursed FDI, and this result should be accounted for in both academic research and public policy design. As an implication, the disbursed FDI is more suitable for investigating the macroeconomic impact of FDI capital inflows, while the registered FDI is more useful as an indicator of future macroeconomic dynamics.
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