Abstract

Purpose: The article extends the gravity model introduced by Tinbergen (1962) and further developed by many scholars such as Zheng et al. (2022), Akhtaruzzaman (2023), Shun-Chiao Chang (2014) and Hui-Ching Hsieh et al. (2019) to assess the impact of macroeconomic factors in Vietnam and its main partner countries on the flow of Vietnam’s outward foreign direct investment (OFDI). Research design, data and methodology: To analyze the drivers of Vietnam’s OFDI into 15 key host countries (which represented 93.9% of Vietnam’s total OFDI capital during the study period), the research uses the fully modified ordinary least square method (FMOLS) and the principal component analysis (PCA) technique with unbalanced panel data from 2007 to 2021. Results: The regression findings indicate that factors such as social index, the size of the economy, shared borders, and economic integration levels positively influence Vietnam's OFDI flows, while geographical distance negatively affects Vietnamese OFDI. Interestingly, the regression results showed that the economic index (comprised from three components namely inflation rate, unemployment rate, and bilateral exchange rate), has no statistically significant effects on Vietnam's OFDI. Conclusions: Based on these findings, the author suggests some recommendations to enhance OFDI flows from Vietnam in the context of its evolving economic integration.