Financial Structure and Economic Growth – Case of Vietnam
Posted: 18 Aug 2014 Last revised: 7 Dec 2014
Date Written: August 18, 2014
Abstract
This paper estimates the actual role of the financial structure for economic growth in Vietnam by using Granger causality test and VAR Cholesky technique. The results show that there is almost no evidence on the relationship between stock market development and economic growth. Instead, Vietnam's financial structure mainly bases on the banking system, and major source of capital in the economy flows through this channel with total outstanding bank loans equivalent to 100% of the GDP. Meanwhile Stock market does not perform well in mobilizing medium and long-term capital, with the market capitalization only about 30% of the GDP of the economy.
Keywords: financial structure, economic growth, stock market, emerging market, Vietnam, bank based
JEL Classification: E44, N25, O16
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