Abstract
Empirical research on the impact of credit on economic growth in Vietnam
Highlights
Economic growth and the factors affecting economic growth are one of the top concerns of every country
This study examines the Granger causality between domestic credit and gross domestic product (GDP) as well as investigating this long-term relationship in Vietnam from 2004:Q1 to 2017:Q4 with the use of the autoregressive distributed lag (ARDL) model as the analysis method
A number of empirical studies (e.g., Ly et al, 2017) indicate that the periods of high credit growth are often associated with macroeconomic instability when inflation increases, bad debt rises uncontrollably, the ability to absorb capital of the economy is negatively affected
Summary
Economic growth and the factors affecting economic growth are one of the top concerns of every country. The ratio of short-term deposit financing for medium-term and long-term loans of the whole banking system was approximately 28% by the end of 2018, reduced significantly compared to the ratio of over 30% in 2016. Controlling domestic credit at a level that may both support economic growth and reduce systemic risk is the long-term goal of the Vietnamese government. In order to have an insight to the relation of domestic credit and economic growth in Vietnam and provide appropriate policy recommendations, this study will analyze the relationship between these two economic variables in the long run and the short run by using the ARDL model. To achieve the research objective, we use data in Vietnam from 2005 to 2017 on a quarterly basis with the variables of gross domestic product (GDP), credit and money supply
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