Analyzing the Causal Nexus Between GDP, FDI, and Tourism: Evidence from Vietnam Before Pandemic COVID-19

The previous studies on the causal relationships between gross domestic product (GDP), foreign direct investment (FDI), and free trade agreement (FTA) in Vietnam have produced heterogeneous results, due to differences in variable definitions, periods, and endogenously included variables, making it difficult to establish a clear three-way relationship. To address this issue, this chapter aims to be the first to broadly elucidate in depth the three-variable causal relationship (GDP, FDI, and FTA) using three different measures for the period 1995–2019. The study employs the autoregressive distributed lag (ARDL) procedure, including a unit root test, cointegration test, and Granger causality test. The results show that the growth rate variables of GDP, FDI, and FTA have cointegration and long-term causal relationships, while GDP, FDI, and FTA measured by taking Ln mainly establish short-term causal relationships. Additionally, GDP per capita and FDI per capita have bidirectional short-run and long-run causality, while FTA per capita only has a one-way short-run causality with GDP per capita. These findings suggest that there is a need for more comprehensive policy implications for the development of each variable and the creation of spillover effects on GDP.