Impact of credit on economic growth and policy recommendations for Vietnam

Abstract

This research examines the impact of credit on economic growth. By employing GMM and 1980- 2015 data set, the model indicates that up to a point, bank credit fosters economic growth. Beyond that limit, credit growth no longer adds to growth as expected. In Vietnam, financial system is mostly based on banking system and bank credit is the main funding source for economic activities while the stock and bond markets are not well-developed. The unbalanced financial structure urges the solutions to ensure financial statbility and improve the role of financial market in fostering economic growth.