Whether Trade Openness Promotes the Credit Growth of Vietnamese Domestic Commercial Banks?

Abstract

The openness theory of financial development holds that a country's trade openness towards the international economy is most likely to promote the development of that country's financial system. This study examines theoretical openness at the micro level by examining the impact of trade openness on bank credit growth in an emerging economy. Using a panel data set of 30 Vietnamese domestic commercial banks over the period 2009–2022, this study finds strong evidence that trade openness drives the credit growth of domestic commercial banks in Vietnam. This research provides valuable evidence of the positive impact of trade openness on the Vietnamese financial system from the perspective of bank lending channels.