Abstract

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While the gravity model has been one of the most successful applications in empirical trades, various attempts are still made to improve its regression results. One of the recent developments in the econometric technique is to extend the gravity model to a panel data framework and take into consideration the existence of dynamic effects. In this paper, we apply these new techniques to examine the important factors which have effects on the Vietnamese export flows.

Regressing both static and dynamic gravity models, we find that there is the strong correlation between the Vietnamese contemporary export flows and those of the previous year and the dynamic model fits the data better than the static one. Vietnamese export growth generally has a positive correlation with Vietnam’s and trading partner income growth. In addition, transport costs have significant effects on Vietnamese export performance.  Other important factors include the exchange rate and the ASEAN membership of trading partners.

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