Trade factors affecting economic growth in Ho Chi Minh City: Evidence from ARDL modelling

Abstract

This study aims to investigate the impact of international trade and foreign direct investment (FDI) on the economic growth of Ho Chi Minh City, addressing the lack of empirical research at the local level in Vietnam. While numerous studies have examined the trade-growth dynamic at the national scale, little attention has been paid to how these relationships manifest within a metropolitan economy that serves as the country’s commercial hub. Using the Autoregressive Distributed Lag (ARDL) model with annual data from 2001 to 2023, the study evaluates both short- and long-term relationships between Gross Regional Domestic Product (GRDP) and key trade variables, including exports, imports, FDI inflows, and exchange rates. The empirical results reveal a complex pattern of relationships. While exports negatively influence GRDP in the long run, this suggests potential structural challenges, such as limited domestic value added or dependency on imported inputs. By contrast, imports and exchange rates have a significant positive effect, indicating that imported goods and favourable currency conditions may support industrial production and consumption. FDI shows no long-term impact, implying that foreign capital inflows may take longer to translate into measurable economic gains or are concentrated in sectors with limited spillover effects. In the short run, the results show that exports contribute positively to economic growth, whereas imports have an adverse impact. This divergence between short and long-run effects underscores the asymmetric nature of trade variables and their time-dependent influence on local economic performance. Overall, these findings highlight the asymmetrical effects of trade variables over time and underscore the importance of tailored trade and investment policies for sustainable growth. The study contributes valuable empirical evidence for policymakers in HCM City and provides guidance for designing strategies to foster sustainable growth in Vietnam’s largest economic market.