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Roles of External Sectors in the Economic Growth of Laos: Focused on Trade, FDI, Foreign Aid, Tourist Revenue, and Remittances

  • Journal of Asia-Pacific Studies
  • Abbr : JAPS
  • 2017, 24(1), pp.131-159
  • DOI : 10.18107/japs.2017.24.1.005
  • Publisher : Institute of Global Affairs
  • Research Area : Social Science > Social Science in general
  • Received : February 7, 2017
  • Accepted : March 21, 2017
  • Published : March 30, 2017

Kim,Kyu 1 Kichul Kwon 2

1경남과학기술대학교
2부산외국어대학교

Accredited

ABSTRACT

This paper tries to examine the impact of external sectors on economic growth in Laos. Since the New Economic Mechanism in 1986, Trade volume and flows of foreign aid, FDI, tourist revenue, and remittances have increased rapidly, which has been considered to contribute to economic growth of Laos. It uses annual time series data during the period 1988-2014. The Augmented Dickey-Fuller unit root test is implemented to ascertain whether the variables included in this analysis are non-stationary. Because all variables are found to be stationary, we implemented Johansen cointegration test which can find the relations between variables avoiding stationarity of variables. The results of empirical analyses show that all foreign trade variables have cointegration relations with GDP except remittances. In addition, it is shown that exports, imports and trade volumes have positive relations with GDP when analysed respectively. But remittances are not shown to have any effect. Foreign aid has greater effect on GDP than any other external sectors. This suggests that to sustain a high rate of economic growth Laotian government should have maintain good relationships with international aid agencies and rich countries and improve trade and FDI policy paradigm. It is desirable for Laotian government to promote exporting manufactural products and nurturing FDI based on the resources of the country.

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