| Inward FDI is an important factor that contributed to the economic development of Lao PDR.This thesis aimed to investigate the effects of inward FDI on GDP per capita,employment,trade openness,gross value add and capital stock on the economic development of Lao PDR from 1988 to 2017 through long-run and short-run estimation.Moreover,based on the variance decomposition result test inward FDI has percentage contributed to GDP per capita,employment,trade openness,and capital stock.And these variables also are significant to attracting FDI inflow to Lao PDR.The study was based on a bound testing,long-run and short-run estimation result which used the approach of Autoregressive Distributive Lag(ARDL)with model ARDL(3,2,3,2,3,3),ARDL(3,3,2,3,3,2)model,ARDL(3,3,3,2,3,3),ARDL(3,0,3,0,0,3)and ARDL(3,3,3,3,3,2)for each dependent variable.Through this empirical study,the findings indicated that mainly long-run and short-run estimation;suggest that,inward FDI has positive effects on GDP per capita,employment,trade openness,and gross value add and capital formation;except inward FDI has a negative relationship with trade openness in longrun,but it is positive with trade openness in short-run.Therefore,we can see that,almost FDI inflow has positive relationship with GDP per capita,employment,trade openness,gross value add and capital formation in both long-run and short-run.Generation lower and upper critical bounds for F-test,lower bound critical values assume that all variables are I(0)while upper bound critical values assume that all variables are I(1).If F-statistic value exceeds upper critical upper bonds,the null hypothesis of no co-integration among variables should reject.If F-statistic falls below lower bound the null hypothesis of no long-run relationship is accepted.The result of ARDL integration shows that,among variables used into GDPP model is co-integration.Due to F-statistic 4.149021 is greater than upper bound I(1)3 at 5% level of significant.Thus the null hypothesis of no co-integration is rejected.The among variables employed into employment model is cointegration,which F-statistic 12.7655 is greater than upper bound I(1)4.15 at 1% level of significant.Thus the null hypothesis of no co-integration is rejected.Among variables employed into trade openness model is co-integration,due to result of ARDL integration shows that,F-statistic 12.81193 is greater than upper bound I(1)4.15 at 1% level of significant.Thus the null hypothesis of no co-integration is rejected.Among variables employed into gross value add model is co-integration due to the result of ARDL integration suggests that,F-statistic 5.490242 is greater than upper bound I(1)4.15 at 1% level of significant.Thus the null hypothesis of no co-integration is rejected.Among variables employed in capital formation model is co-integration due to result of ARDL integration shows that,F-statistic 4.949446 is greater than upper bound I(1)4.15 at 1% level of significant.Thus the null hypothesis of no co-integration is rejected;we can see that,almost variables which employed for this study have co-integration.The result of long-run estimation indicated that,almost FDI inflow is positive relationship with GDPP,EM,GVA and CP,but it is negative relationship with TR,due FDI inflow to Laos in the past still did not focused on exporting as much as.The foreign firms in Laos had focused on exporting and imported a lot of technology,machinery and equipment since since 2000 s.The result of short-run estimation of each model suggests that,the estimate of the lagged error correction term found to be statically significance with negative sign at 5% and 1% differently level of significant of each model.This indicated that,the speed of adjustment from short-run towards long-run equilibrium for each model.The finding variance decomposition results of 10 periods in the shock block to check the determination of one variable to other variables,which suggest that gross domestic product per capita(GDPP)can be determined by 6.17% by foreign direct investment,4.24% by employment,4.88% by capital formation,0.35% by gross value add and 5.71% is explained by and trade openness.The variance decomposition confirmed the result of the long-run and short-run model that inward FDI is determined by GDP per capita,capital formation,gross value added,employment and trade openness 28.37%,19.59%,3.62%,0.43%,and 25.12% respectively.The employment is determined by GDP per capita,FDI,capital formation,gross value add and trade openness 52.77%,23.44%,9.87%,3.12%,and 0.60% respectively.The trade openness is determined of GDP per capita,FDI,capital formation,gross value and employment 35.25%,8.68%,3.896356%,7.52%,and 2.34% respectively.The gross value add are determined by GDP per capita,FDI,capital formation,employment and trade openness 77.02%,6.26%,4.92%,0.36%,and 6.51% respectively.The capital formation is determined by GDP per capita,FDI,gross value add,employment and trade openness 57.86%,6.61%,4.71%,0.44%,and 6.49% respectively. |
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