tiểu luận kinh tế lượng THE FACTORS AFFECTING VIETNAM’S RICE EXPORT IN THE PERIOD 1990 2018

According to hypothesis raised in the chapter, results have revealed thatthe main impacts on Vietnam rice export are gross domestic product GDP, landarea, rice production, inflation... A

FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS

-o0o -ECONOMETRICS REPORT

THE FACTORS AFFECTING VIETNAM’S RICE

EXPORT IN THE PERIOD 1990-2018

Course: KTEE218.1

Group number: 5

Student’names - ID: Lê Phương Anh – 1814450011

Nguyễn Hoàng Long – 1814450049 Nguyễn Hoàng Mai – 1814450105 Trần Nhật Mỹ – 1814450056 Nguyễn Hoài Phương – 1814450064 Instructor : Dr Nguyễn Thúy Quỳnh

Hanoi, September 2019

Group’s member and assessments

contribution completion

TABLE OF CONTENTS

ABSTRACT 3

INTRODUCTION 4

SECTION I OVER VIEW OF THE TOPIC 6

I Definitions 6

II Relevant theories 6

III Economic Theory 8

1 Market-Power Theory of Inflation: 8

2 Conventional Demand-Pull Inflation: 9

3 Structural Theories of Inflation: 9

IV RELATED PUBLISHED RESEARCHES 11

1 Overseas research on rice export 11

2 Domestic research on rice export 11

V RESEARCH HYPOTHESIS 11

SECTION II MODEL SPECIFICATION 13

I Population regression model 13

II Sample regression model 13

III Explanation of variables in the model 14

IV Expectation in influence of independent variables on dependent variable 15 V Statistically Data Description 15

1 Descriptive statistics 1

5 2 Data description 1

6 SECTION III ESTIMATED MODEL AND STATISTICAL INFERENCES 17 I Estimated model 17

II Hypothesis testing 19

1 Testing hypotheses of coefficients 1

9 2 Testing the fit of regression model 2

2

Vietnam is known as one of the biggest rice exporters in the world Rice fromVietnam is available in more than 120 countries and territories in all continents inthe world Vietnam’s exported rice increases quickly in terms of quantities, but itsexport value is not high and increases slowly Also, it does not ensure the benefitsand incomes for the rice farmers This makes the rice export of Vietnam noteffective, unsustainable, and unstable

This report explores the factors influencing Vietnam’s rice export in the period1990-2018 According to hypothesis raised in the chapter, results have revealed thatthe main impacts on Vietnam rice export are gross domestic product (GDP), landarea, rice production, inflation

Vietnam is known as an agricultural country, with 80% of the populationliving in rural areas and 73% of the labor force engaged in agriculture (1990statistics) and by 2017 there were 69% of workers East of rural areas, more than40% of laborers are engaged in agriculture Therefore, rice export is always anindustry that brings great economic value and has a positive impact on oureconomy, helping to exploit the relative and absolute advantages of Vietnam in theperiod of world economic integration With a stable and high production growthrate, the export capacity of Vietnamese rice items has increased year by year inorder that Vietnam has expanded its market to more than 80 countries andterritories, ranked second in the world about rice export However, the promotion ofrice export as well as the efficiency of rice export in Vietnam still have manypressing issues such as low rice export price, the quality of exported rice does notincrease, the benefits of rice grain makers are not guaranteed, Especially, in thecontext of deeper and deeper international economic integration of Vietnam atpresent, rice export is dealing with big challenges such as: unstable market.Therefore, the competition trend of new rice exporting countries is getting more andmore violent Thus, the export of rice in Vietnam is affected by many micro andmacro factors According to economic experts, there are many different factors thatare objective (influences from the world economy) and subjective can affect the riceexport in Vietnam So the questions our report refers to are what are those factors? ,How are these trends and impact levels? These are really important and practicalquestions not only for policy makers but also essential for organizations andindividuals operating in the field of agricultural exports, especially rice.Recognizing the importance and complexity of the problem, we chose the topic "The factors affecting Vietnam’s rice export in the period 1990-2018" to clarify theinfluencing factors, thereby proposing a number of appropriate solutions to boostVietnam's rice exports in the near future

Researching the factors affecting the export of rice in Vietnam, therebyproposing some solutions based on promoting the effects of beneficial factors and

activities in the future Moreover, our report wants to contribute to systematizingand developing theoretical basis as well as summarizing practical studies on factorsaffecting rice export Besides, we analyze the current situation and factors affectingVietnam's rice export, thereby clarifying the achievements and limitations inVietnam's rice exports in the period 1990-2018 Our report suggests some solutions

to promote the influence of beneficial factors and limit the effects of adverse factors

to boost Vietnam's rice exports in near future

Our report researches the factors influencing the export of rice in Vietnam.About the scope of research, we explore, evaluate and quantify the influence offactors on export of rice in Vietnam through special targets, indicators and analysismodel The content analyzes and evaluates in order to propose some solutions toboost the output and export turnover of the rice in Vietnam On the other hand, thisreport uses the data sources for research in the period 1990-2018 and the countrythat was primarily studied on this topic is Vietnam

After studying and processing data seriously, group 5 came up with the resultsthat the most important factor affecting the value of our country's rice exports is theGross Domestic Product (GDP), next the land area, then inflation, and finally therice production generated in Vietnam

The structure of research:

Chapter 1: Overview of the topic

Chapter 2: Model specification

Chapter 3: Estimated model, Hypothesis testing and Recommendations

SECTION I OVER VIEW OF THE TOPIC

I Definitions

Exporting is one way that businesses can rapidly expand their potential market.

Exporting is the basic activity of foreign trade It has appeared very early in thehistory of social development and increasingly strong development in both widthand depth Their primitive form was merely the exchange of goods, but so far it hasdeveloped very strongly and manifested in many forms

Gross Domestic Product (GDP) is the market value of all final goods and services

produced within an economy in a given period of time

Inflation is a sustained increase in the general price level of goods and services in

an economy over a period of time

II Relevant theories

The study uses linear regression models and least squares estimation methods

• Linear regression model

Linear regression analysis is a method of analyzing the relationship betweendependent variable Y and one or more independent variables X Modeling useslinear functions (degree 1) The parameters of the model (or function) are estimatedfrom the data

Y= β0 + β1Xi1 + β2Xi2 + + βnXin + u

Components of a linear regression model:

* Variables

- Dependent variables: are variables that we care about its value, usually denoted by

Y and located on the left side of the equation The dependent variable is also calledthe explanatory or reaction variable

- Independent variable: is a variable that is supposed to affect the dependentvariable, usually denoted by X and located on the right side of the equation Theindependent variable is also called the explanatory variable

* Random error

The random error, often denoted by u, is a representative of the factors that affectthe variable Y, in addition to X In the model we don't have observations about it, sosometimes u can is called unobserved random error Therefore, for the regressionfunction to make sense, it is necessary to make assumptions for this component Theassumption is given that: at each value of X, the expectation of u is zero

*The regression coefficients include β0, β1, β2, , βn, showing the relationshipbetween variables X and Y when the factors included in u are unchanged

• Least squares estimation methods.

The least squares method, also known as the least squares or minimum squares, is

an optimization method to select the best line for a data range corresponding to themaximum value of the error statistics (errors) between matching lines and data.Suppose the data consists of points (xi, yi) with i = 1, 2, , n We need to find afunction f that satisfies

f (xi) ≈ yiSuppose the function f can change shape, depending on some parameters, pj with j

III Economic Theory

1 Market-Power Theory of Inflation:

In an economy, when a single or a group of sellers together decide a new price that

is different from the competitive price, then the price is termed as market-powerprice Such groups keep prices at the level at which they can earn maximum profitwithout any concern for the purchasing power of consumers

For example, in the past few years, the prices of onion were very- high in India Thesoaring price of onions was the result of the group action of onion producers Insuch a situation, people in middle and low income groups reduced the consumption

of onions However, onion producers earned high profits from higher income group

According to the advanced version of market power theory of inflation, oligopolistscan increase the price to any level even if the demand does not rise This hike inprice levels occurs due to increase in wages (because of trade unions) in theoligopolistic industry

The increase in wages is compensated with the hike in prices of products Withincrease in the income of individuals, their purchasing power also increases, whichfurther results in inflation

Apart from this, some economists concluded that fiscal and monetary policies arenot applicable in practical situations as these policies are not able to control rise inprices levels These policies would work only when prices rise due to an increase indemand

Moreover, these policies cannot be applied to oligopolistic rise in prices, which isdue to increase in the cost of production Monetary policy can reduce the rate ofinflation by raising the interest rate and regulating the credit flow in the market.However, it would have no effect on the oligopolistic price as the cost is transferred

to the prices of goods and services

2 Conventional Demand-Pull Inflation:

The market power theory of inflation represents one extreme end of inflation.According to this theory inflation exists even when there is no excess in demand

On the other end, the conventional demand-pull theorists believed that the onlycause of inflation is the excess of aggregate demand over aggregate supply

In full employment equilibrium condition, when demand increases, inflationbecomes unavoidable In addition in full employment condition, the economyreaches to its maximum production capacity At this point, the supply of goods andservices cannot be increased further while the demand of products and servicesincreases rapidly Due to this imbalance between demand and supply, inflation takesplace in the economy

3 Structural Theories of Inflation:

Apart from the two extreme ends mentioned in the above, there is a middle group ofeconomists called structural economists According to structural theory of inflation,market power is one of the factors that cause inflation, but it is not the only factor.The supporters of structural theories believed that the inflation arises due tostructural maladjustments in the county or some of the institutional features ofbusiness environment There are two different types of structural theories ofinflation

• Mark-up Theory:

Mark-up theory of inflation was proposed by Prof Gardner Ackley According tohim, inflation cannot occur alone by demand and cost factors, but it is thecumulative effect of demand-pull and cost-push activities Demand-pull inflationrefers to the inflation that occurs due to excess of aggregate demand, which furtherresults in the increases in price level The increase in prices levels stimulatesproduction, but increases demand for factors of production Consequently, the costand price both increases

In some cases, wages also increase without rise in the excess demand of products.This results in fall in supply at increased level of prices as to compensate theincrease in wages with the prices of products The shortage of products in themarket would result in the further increase of prices.

Therefore, Prof Gardner has provided a model of mark-up inflation in which boththe factors, demand cost, are determined Increase in demand results in the increase

of prices of products as the customers spend more on products

On the other the goods are sold to businesses instead of customers, then the cost ofproduction increases As a result, the prices of products also increase Similarly, arise in wages results in increase in cost of production, which would further increasethe prices of products

So according to Prof Gardner, inflation occurs due to excess of demand or increases

in wage rates; therefore, both monetary and fiscal policies should be used to controlinflation Though, these two policies are not adequate to control inflation

• Bottle-Neck Inflation:

Bottle-neck inflation was introduced by Prof Otto Eckstein According to him, thedirect relationship between wages and prices of products is the main cause ofinflation In other words, inflation takes place when there is a simultaneous increase

in wages and prices of products However, he believed that wage push or power theories alone are not able to provide a clear explanation of inflation

market-After analysis of inflationary situation, Prof Eckstein says that the inflation occursdue to the boom in capital goods and wage-price spiral In addition, he alsoadvocated that during inflation prices in every industry is higher, but few industriesshow a very high price hike than rest of the industries

These industries are termed as bottle-neck industries, which are responsible forincrease in prices of goods and services In addition, Prof Eckstein advocated thatconcentration of demand for products of bottle industries results in inflation

IV RELATED PUBLISHED RESEARCHES

1 Overseas research on rice export

- Muhammad Abdullah, Jia Li, Sidra Ghazanfar, Majid Lateef, Jaleel Ahmed, ImranKhan and Mazhir Nadeem Ishaq “What Factors Determine the Rice Exports ofPakistan? Finding the Answer by Applying the Gravity Model ”: indicates thatPakistan's rice exports are influenced by the GDP of importing countries, Pakistan'sGDP, geographical distance and common border

- Somphoom Sawaengkun "Economic factor transforming rice export of Thailand" shows that an increase in export price will increase Thailand's export rice volume

2 Domestic research on rice export

- Tran Thi Bach Yen, Truong Thi Thanh Thao "Factors affecting Vietnam's riceexport to ASEAN market" factor of GDP of exporting country (Vietnam),geographical distance, inflation index and size Vietnam's agricultural land area has apositive impact on export turnover; And the economic gap has the opposite effect.Magazine Post: THE UHD-CTU ANNUAL ECONOMICS AND BUSINESS

CONFERENCE PROCEEDINGS

- Ngo Thi My (2015) "Researching factors affecting the export of some agriculturalproducts of Vietnam" to find out some important factors affecting agriculturalproduct exports in general, affecting rice exports and coffee in particular ofVietnam such as GDP, population, agricultural land area, exchange rate, openness ofeconomy and members of WTO, APEC

- Bui Thi Hong Hanh "Analysis of factors affecting Vietnam's rice exports" bygravity model The results show that the biggest impacts on Vietnam's rice exportsare gross domestic product (GDP), prices, population and exchange rates

V RESEARCH HYPOTHESIS

Hypothesis 1: Increasing GDP has a positive impact on Vietnam's export

When analyzing the factors affecting exports, the first factor mentioned is GDP Gross domestic product of the exporting country Most studies of exporter's GDPsuggest that this factor has a positive impact on exporter's GDP It can beunderstood that when the economy size increases, the export ability will alsoincrease, because then the exporting country has conditions to invest in developingscience and technology, new varieties to improve their capacity productivity andquality to increase export capacity.

-Hypothesis 2: Inflation has a positive effect on Vietnam's rice exports.

Inflation will have a certain impact on the economy in general and commodityimport and export activities in particular In fact, when inflation increases, the price

of domestic goods will rise, reducing the competitiveness of domestic enterpriseswith foreign enterprises, thereby affecting the export of goods From the perspective

of studying the impact of inflation on agricultural exports of Vietnam, thehypothesis is that inflation is positively correlated with agricultural exports.Because rising inflation will cause export prices to rise, exporters tend to exportmore

Hypothesis 3: Vietnam's rice land area has a positive impact on Vietnam's rice export.

Rice area is the land area used for rice production activities of a country, rice landarea plays an important role for agricultural activities of a country in general andimporting country in particular Therefore, large or small agricultural land area notonly determines the size of domestic production but also affects the import andexport strategy of agricultural products in that country In general, when it comes toexporting countries, the agricultural land area will have a positive impact on theexport turnover of agricultural products because the production scale is expanded,the production of goods is large, making the supply of exports increased anddemand for imported agricultural products decreased

Hypothesis 4: Domestic rice production has a positive impact on rice export