Determinants of Trade Balance in Vietnam During the Period 1989-2013

Viet Nam has faced with trade deficits for a long time since opening the economy in 1986 until 2012. Improving trade balance is one of the main objectives of Vietnam’s Government. This study’s objective is to analyse main factors that affect to trade balance in Vietnam from 1989 to 2013. The examined factors are Gross domestic product (GDP), Foreign direct investment (FDI), Government expenditure (GEXP), Household expenditure (HEXP), Oil price (OIL) and Industrial growth rate (INDGR). The study uses annual data from 1989 to 2013 and applies Ordinary Least Square (OLS) method in order to investigate impact of those factors on trade balance in Vietnam. The results show that Gross domestic product, Foreign direct investment and oil price have positive impacts on trade balance while Government expenditure, Household expenditure and industrial growth rate have negative impacts on trade balance.