Tóm tắt Luận án Economic integration, energy consumption and economic growth

In general, there are a few previous studies on the impact of the global integration of economic growth. Although each study analyzed one type of integration, the conclusions of the studies were similar. Most of the previous studies confirmed that global integration has a positive impact on economic growth. So, the dissertation assumed that economic integration would be a positive impact on economic growth in the case of Vietnam. The relationship between financial integration and economic growth The relationship between financial integration and economic growth has been well-known. However, the conclusion of the empirical studies is not consistent, even directly debating. Group 1: Group advocate financial integration Acemoglu and Zilibotti (1997), Edison et al. (2002a) are the authors who supported on financial integration. They believe that international financial integration will facilitate risk sharing, expanding market-consuming, forming global supply chains, thereby enhancing the specialization of production, allocation of capital, and increasing the economic growth rate. Also, international financial integration will improve the operation of the domestic financial system through enhanced competitiveness and the development of financial services. Integration also promotes economic growth by helping businesses reduce input costs (the rate of borrow interest), increasing profits, and encouraging domestic investments. The studies of Bonfiglioli (2008), Altomonte and Nicolini (2012) showed that domestic businesses have to engage and compete with multinational enterprises; they must improve competitiveness and improve productivity. The research of Bauer et al. (2014) confirmed that domestic enterprises would restructure the cost and tax obligations. Dreger and Zhang (2014), Samina et al. (2019) also said that developing nations should be integrated to receive high technological machines from developed countries. The study of Lawal et al. (2016), Saucier and Rana (2017); Boglioni (2018); Danlami et al. (2018) were found when a country integrated into a worldwide; this country can be received various advantages as improving the trade balance, expanding the market and take part in international supply chains. Financial integration will boost startup activities is the conclusion of Coulibaly et al. (2018). Group 2: Group do not advocate financial integration Lucas (1990) discovered a paradox (labeled is Lucas paradox). In the theory of literature economic, the flow of capital must shift from the United States (the rich capital) to India (the poor capital). However, the actual situation oppositely took place, which means the capital flows from India to the United States. To explain the paradox, Lucas (1990) believes that international capital does not flow to the undeveloped countries due to which human capital and institutional quality are low. The market is not perfect, and there is a lot of other risks that come from developing nations that do not comply with its obligations and may sever the relationship with Investors. The finding of Lucas has promoted the group from advocating financial integration. Boyd and Smith (1992) stated that international financial integration in weak institutional countries could lead to an amount of capital going out, from the domestic to better institutional countries. Physical domestic capital should be scarce. Rodrik (1998), Edwards (2001), Okada (2013) also said that high international financial integration pushed emerging economies into a recession, the benefits are less while the negative impacts are challenging to control. Emerging markets can be more financially institutional, so it is highly susceptible to the volatility of the global financial market, which is especially severe for countries with an open capital account. Rahman and Shahari (2017), Vinh and Phong (2017), Trang and Kieu (2015) said that financial integration would not be the same between developed countries and developing countries due to countries have a different trade policy and amounts of exchange reserves. With a little reserve, developing countries often slow/weak response to the "economic shocks" or recession. Group 3: Opposing groups and conditional groups Edwards (2001) found that international capital flows will impact negative economic growth in developed countries, but the positive impact on economic growth in developing countries. However, Arteta et al. (2001), Edison et al. (2002b) state that the empirical results of Edwards were not reliable because it does not satisfy the stability test. In other studies, Quinn (1997) concluded that financial integration has a positive impact on economic growth, but Kraay (1998), Arteta et al. (2001) confirmed that the result of Quinn (1997) was not reliable. Some studies have shown that the impact of financial integration on economic growth only takes place under certain conditions. According to Bashar and Khan (2007), financial integration has a positive effect on growth when the country accumulates excellent human capital resources. Batuo et al. (2018), Pradhan et al. (2018) believe that financial integration is only suitable for countries with an extensive financial system and technology. Finally, the study of Ngo Hoang Trang and Nguyen Thi Diem Kieu (2015) said that financial integration is only suitable for countries with large amounts of exchange reserves. The relationship between trade integration and economic growth The relationship between trade integration and economic growth has also been the many debates topic by the Economist. Disagreement is demonstrated in both theoretical and empirical results. Baldwin and Seghezza (1996) said that trade integration helped attract more capital for non-commercial areas. The domestic goods will be cheaper and of higher quality. Trade integration reduces the price of the imported machinery or material raw, which leads to a reduction in the business cost for enterprises. Romer (1989), Danlami et al. (2018), Ma et al. (2019) showed that trade integration could also impact economic growth through improved technology due to the horizontal and longitudinal technological spreads in the same supply chain or between global product supply chains together. Economic benefits at the scale of research and development activities will be transferred gradually in the process of investment reception, and interdependent in meeting the needs of customers. Frankel and Cavallo (2008) claim that economies with sizeable commercial integration often have to adjust the reduction of real rates to balance the current account, so the negative consequence of lowering the price of the coin is less severe, resulting in that country being less likely to break down. Besides, trade integration also helps countries less vulnerable to negative implications of financial integration when capital flows suddenly stop or fall into the financial crisis. Trade integration helps to pay the external debt and avoid recession. However, no relationship between trade integration and economic growth is the conclusion of Musila and Yiheyis (2015) in the case of Kenya. Bolaky and Freund (2004) said that the magnitude of trade integration would be more reliable in better institutional countries. Besides, there is a significant concern that developed countries often play a dominant role in international trade and investment organizations such as WTO, IMF. Some policies or regulations issued by WTO, IMF have often brought many benefits to developed countries. 2.3. A summary of previous studies on the relationship between energy consumption and economic growth Over the past four decades, the relationship between energy consumption and economic growth was an interesting topic for researchers and policymakers. Energy production is the spearhead industry in many countries. Moreover, energy impacts both the total supply and the total demand in the economy. The directions that the causal relationship between energy consumption and economic growth could be categorized into four hypotheses, as follow: The Conversation hypothesis: It suggests that the policy of conserving energy consumption may be implemented with little or no adverse effect on economic growth, such as in a less energy-dependent economy. The conservation hypothesis is supported if an increase in real GDP causes an increase in energy consumption. The Growth hypothesis: It implies that restrictions on the use of energy may adversely affect economic growth, while increases in energy may contribute to economic growth. The growth hypothesis suggests that energy consumption plays an essential role in economic growth both directly and indirectly in the production process as a complement to labor and capital. Consequently, we may conclude that energy is a limiting factor to economic growth and, hence, shocks to energy supply will harm economic growth. The Feedback hypothesis: It implies that energy consumption and economic growth are jointly determined and affected at the same time. Accordingly, increasing the energy consumption at present will end economic growth at the next stages and versa. The Neutrality hypothesis: It implies that energy consumption is not correlated with GDP, which means that neither conservative nor comprehensive policies to energy consumption have any effect on economic growth. Thus, the neutrality hypothesis is supported by the absence of a causal relationship between energy consumption and real GDP. To explain four hypotheses, Apergis and Payne (2009), Lee and Chang (2007) claim that the demand for energy consumption depends on each stage of development of the country. The development of a country could be divided into three main stages: Stage 1: Pre-industrial stage. Characteristics of this stage are the simple production operation because it relies primarily on natural extraction. The majority of people working in agricultural areas, machinery is not developed, should need to consume energy for production, for the consumption of businesses/households in general on a small scale. Stage 2: Industrial stage. Features of this stage are the advancement of science and engineering, and machinery is introduced into the production process, replacing the skills of the workers increasingly. The increase in material wealth is also synonymous with the consumption of more energy, emissions to the environment more and more. The process of moving labor from agricultural to industrial sector takes place on a full scale, forming clusters and industrial parks. The demand for increased incomes is higher than the demand for quality of life. During this period, the demand for energy consumption is a spike, and there are no signs of stopping. Stage 3: Post-industrial stage. This period noted the remarkable development of engineering science, and the economic structure shifted in direction from industry to service. Along with improved income, the environmental protection consciousness of people, businesses, and governments will be formed. They gradually move forward to not accepting environmental quality changes do energy consumption caused by economic growth. Energy consumption tends to reflow, diminishing, or switching to consuming clean, more environmentally friendly energy. Economic growth Pre- Industrial stage Industry stage Post- Industrial stage Turning point Energy consumption 2.4. Research hypothesis To conclude theoretical and experimental studies, combined with the management of economic integration and energy consumption in Vietnam, the thesis states that the following research theories: Hypothesis H1: Global integration has a positive impact on economic growth Hypothesis H2: Financial integration has a positive impact on economic growth Hypothesis H3: Trade integration has a positive impact on economic growth Hypothesis H4: Energy consumption has a positive impact on economic growth Hypothesis H5: The impact of energy consumption on economic growth is constant. Hypothesis H6: The impact of energy consumption on economic growth is the symmetrical impact. 2.5. Research gaps In summary of experimental studies, the thesis found there were several research flaws such as the following: Firstly: Previous studies only analyze the individual impacts of each type of economic integration to economic growth. The analysis provides an incomplete view of all the impacts of economic integration. Most developing countries (inclusive Vietnam) are simultaneously participating in three forms of integration: Global integration, financial integration, and trade integration. Secondly: Previous studies are based on a fundamental assumption that the impact of energy consumption on growth is constant in all periods. Many factors dominate economic activities. Thus, corresponding to each period is the scale of the economy, each method of operation of different material production, i.e., economic growth, or economic integration will be coordinated by the "threshold effect" of the institutional quality or the rate of inflation level. Thirdly: In addition to ignoring the threshold effect, previous studies for the Vietnamese economy are based on the assumption that data not existent a "structural breakpoints". In 1986-2018, Vietnam had two essential milestones in economic integration: (i) In 1995, the United States banned economic sanctions, and Vietnam was being joined as a member of the Association of Southeast Asian Nations; (ii) In 2008, Vietnam is an official member of the World Trade Organisation. Two events may be the reason for believing that the assumption (not existent the structural breakpoint) is yet to be reasonably. Fourthly: Previous studies are based on the assumption that the impact of energy consumption on economic growth is the symmetrical impact. That means the increasing energy consumption and reducing energy consumption will impact economic growth is the same. The assumption may not be practical because Vietnam and the world economy have against some crises in the period 1971-2017. Furthermore, high technology makes the machinery less energy-consuming, so the contribution of energy consumption into economic growth tends to diminish. CHAPTER 3: RESEARCH DESIGN 3.1. Research directions of the thesis The dissertation was be divided into three directional research, as follow: Detail: Economic integration Energy consumption Economic growth 2 1 3 1 3 2 Direction 1: The direction is designed to investigate the impact of economic integration on economic growth both in the short term and long term. Direction 2: The direction is designed to investigate the impact of energy consumption on economic growth both in the short term and long term. Direction 3: The direction is designed to investigate the impact of economic integration, and energy consumption on economic growth both in the short term and long term. 3.2. The research model for direction 1 0 1 2.t t t tLnGDP X UB u  = + + + (Eq. 1) 0 1 2 3 4. . .( . ) .t t t t t t tLnGDP X DT X DT UB u    = + + + + + (Eq. 2) Notes: UB is the rate of urbanization; it plays the role of the control variable. ut is the error. Xt is global integration (labeled KOF), financial integration (labeled IFI), or trade integration (labeled OPEN). DT is a dummy variable (before "structural breakpoint" is 0, after "structural breakpoint" is 1). Annual data are collected from 1986 to 2018. "Ln" is the logarithm. 3.3. The research model for direction 2 0 1 2 3 4. . .( . ) .t t t t t t tGDP X DT X DT UB u    = + + + + + (Mô hình 3) 0 1 2 3. . .t t t t tGDP ECcapita Oilcapita UB u   = + + + + (Mô hình 4) Notes: Notes: UB is the rate of urbanization; it plays the role of the control variable. ut is the error. In Eq. 3, Xt is the average petroleum consumption per capita Oilcapita (to analyze the impact of petroleum consumption on growth), Xt is the average electricity consumption per capita (to analyze the impact of electricity consumption on growth). DT is a dummy variable (before "structural breakpoint" is 0, after "structural breakpoint" is 1). Annual data are collected from 1971 to 2017. 3.4. The research model for direction 3 0 1 2 3. . .t t t t tLnGDP LnIFI LnEC UB u   = + + + + (Eq. 5) Note: Notes: UB is the rate of urbanization; it plays the role of the control variable. ut is the error. The LnIFI variable is the logarithm of financial integration, and the LnEC variable is the logarithm of electricity consumption per capita. Annual data are collected from 1986 to 2017. 3.5. Sources of data Annual data for economic growth are collected from the World Bank (WB), International Energy Agency (IEA), United Nations Conference on Trade and Development (UNCTAD), and Swiss Economics Studies. 3.6. Methodology The dissertation applies some econometric technical approach, as follows: The Ordinary Least Square regression (OLS), Threshold regression (TR), Autoregressive Distributed Lag (ARDL) approach, Nonlinear Autoregressive Distributed Lag (NARDL) approach, and the Toda and Yamamoto (1995) causality test. CHAPTER 4: EMPIRICAL RESULTS AND DISCUSSION 4.1. A brief of economic growth, integration, and energy consumption in Vietnam in the period of 1971-2018. Regarding economic integration, according to the Vietnam Chamber of Commerce and Industry (VCCI) after the economic innovation in 1986, Vietnam's economy has gradually entered into the regional/world economy. In 1995, Vietnam was being joined as an official member of the Association of Southeast Asian Nations. In 2008, Vietnam was an official member of the World Trade Organization (WTO). By March 05/2019, Vietnam has signed 12 bilateral and multimodal free trade agreements, which are negotiating four agreements. One hundred twenty-six countries/territories have foreign direct investment projects in Vietnam, and Vietnam has trade relations with about 178 countries/territories around the World. Economic integration is being given the support of Government and administrator in Vietnam. Regarding energy consumption, the increase in economic growth leads to an increase in energy consumption. However, electricity consumption per capita is too high. To make 1 unit of products, Vietnam has to spend power output almost three times more than the Chinese and Asian countries. Vietnam has been negatively affected by the regional economic crises of Asian in 1997 and the World in 2008, but the economy is still growing drastically throughout the 1986-2018 period, with many positive transitions in quantity and quality. According to the World Bank, income per capita has increased by nearly six times, from 391 (USD/person/year) in 1986 to 1.965 (USD/person/year) in 2018 (at a fixed price in 2010). Vietnam is ranked as a developing country since 2012. 4.2. The empirical result of direction 1 Table 1. The impact of integration on growth in the long term Variables Coefficient Std.Error P-value KOF -0,0147 0,0220 0,513 DT 1,1953 0,8458 0,177 KOF_DT -0,0245 0,0217 0,274 UB 0,1449 0,0650 0,041 Intercept 0,4259 0,2894 0,161 LnIFI 0,1059 0,0345 0,008 DT 3,3715 1,1336 0,009 LnIFI_DT -0,3458 0,1201 0,011 UB 0,1207 0,0219 0,000 Intercept 0,4859 0,2419 0,063 OPEN 0,0248 0,0078 0,006 DT 1,5102 0,5274 0,013 OPEN_DT -0,0203 0,0074 0,016 UB 0,0402 0,0092 0,001 Intercept 0,8994 0,2097 0,001 The result in table 1 showed that global integration (KOF variable) harm growth, but not yet significant. The financial integration and trade integration has a positive impact on economic growth at a 1% level significant. The LnIFI_DT variable and the OPEN_DT variable have a negative impact. That means both of the financial integration, and trade integration will boost economic growth in the case of Vietnam. However, the size of the impact trend to diminish after 1995 (there is a "breakpoint" in 1995). 4.3. The empirical result of direction 2 Table 2. The impact of energy consumption on growth in the long term The result of electricity consumption by ARDL approach Variables Coefficient Std.Error P-value ECcapita 0,9904 0,2098 0,000 DT 110,74 26,935 0,000 EC_DT -0,9178 0,1976 0,000 UB 81,440 5,1313 0,000 Intercept -625,45 137,70 0,000 The result of electricity consumption by NARDL approach ECcapita_POS 0,1024 0,0291 0,001 ECcapita_NEG -6,9053 3,5553 0,061 The result of petroleum consumption by ARDL approach Oilcapita -267,97 166,16 0,115 DT -4,1862 75,667 0,956 Oil_DT 61,937 175,27 0,726 UB 137,03 27,523 0,000 Intercept -322,29 97,904 0,002 The result of petroleum consumption by NARDL approach Oilcapita_POS 114,265 46,809 0,020 Oilcapita_NEG -58,943 19,878 0,006 Table 2 showed that the impact of electricity consumption on economic growth is a positive and asymmetrical impact by both of ARDL and NARDL approach. Petroleum consumption has a positive impact on growth in the long term. The impact of petroleum consumption is also asymmetry. Accordingly, the impact of increasing petroleum on growth is stronger than decreasing petroleum. 4.4. The empirical result of direction 3 Table 3: The impact of integration and energy consumption on growth Variables Coefficient Std.Error P-value The empirical result by OLS regression LnIFI 0,0205 0,0030 0,000 LnEC 0,3725 0,0243 0,000 UB 0,0115 0,0047 0,020 Intercept 4,1671 0,0318 0,000 The empirical result by ARDL approach LnIFI 0,0283 0,0123 0,035 LnEC 0,2219 0,0718 0,007 UB 0,0283 0,0106 0,017 Intercept 1,8936 0,6860 0,014 R_square = 0,87, Adj R_square = 0,78 ECM = LnGDP - [0,0283.LnIFI + 0,2219.LnEC + 0,0283.UB + 1,8936] The results in table 3 showed that both economic integration and energy consumption have a positive impact on economic growth in the case of Vietnam over the period 1986-2017. 4.5. Discussion Discussion to the relationship between economic integration and economic growth The conclusion of this study advocated for all three hypotheses H1, H2, H3. Accordingly, the overview of the integration has a positive impact in the short term, while the financial integration, trade integration has a positive impact on economic growth in Vietnam. Comparing this conclusion to previous studies also exists several different points, as follows: About global integration: The dissertation concludes that global integration has a positive impact on economic growth in the short-term. This conclusion conciliated with the conclusion of Dreher (2006), Suci et al. (2015), Tran Tho Dat and Nguyen Thi Cam Van (2017). The practice shows that Vietnam has a significant transformation since 1995 when Vietnam was a member of ASEAN. Focusing on three pillars of cooperation: economic cooperation, cooperation on national security, and cultural cooperation. ASEAN has been ranked as the most dynamic economic region for about the past two decades by the United Nations. About financial integration: The dissertation concludes that financial integration has a positive impact on economic growth both in the short term and long term. This conclusion is similar to the study of Zhang and Matthews (2019), Ghosh (2019), Vinh and Phong (2017) for Asian countries, the study of Danlami et al. (2018) for the Nigeria economy, the study of Rahman and Shahari (2017) for Asian+3 countries. But again, the conclusion of Vo Xuan Vinh and Duong Hoai Anh (2017), the study of Musila and Yiheyis (2015) for the Kenyan economy in the period 1982- 2009. The author argues that the dissertation is consistent with the socio-economic practices of Vietnam because Vietnam is the following developed country. It is necessary to make the most of the advantages of geographical location, natural resources, and the trend of capital and technology movement of the World. Thanks to the economic integration, Viet Nam has consistently sustained political stability, income per capita is improved, the rate of growth is always higher than 5% per year, attracting foreign direct investment is always greater than 10 billion per year during the period from 2008 to present, despite the overwhelming impact from the global financial crisis of 2008. About trade integration: The dissertation concludes that trade integration has a positive impact on economic growth both in the short term and long term. This conclusion was similar to the study of