Banking Development, Economic Growth and Energy Consumption in Vietnam

Abstract

The main objective of this paper is to examine causal nexus between Banking Development, Economic Growth, and the Energy Consumption in the context of a single country. To achieve this objective, the data of banking development, economic growth and the energy consumption is collected for Vietnam. The data is sources from World Development Indicators (WDI), data spanning from 1995 to 2019 which covers a period of 25 years. Given the time series nature of the data, the paper uses the approach of Autoregressive Distributed Lag (ARDL). The findings suggest the economic growth, energy consumption and banking development in Vietnam are cointegrated, suggesting long run relation amongst the three variables. More precisely, the paper finds a positive impact of energy consumption as well as the banking development on economic growth. The research findings of this paper have several policy implications for Vietnam. The positive effect of energy consumption on the economic development of Vietnam suggest that the country is making efficient use of its energy consumption. Nevertheless, Vietnam must take cautious approach while harnessing energy consumption and continuously evaluate the channels. Moreover, Vietnam should also keep improving the banking system in order to support the long run economic growth in the Vietnam. As a direction for future research, researchers are suggested to employ non-linear approaches to evaluate the non-linear relationship between economic growth, banking development and energy consumption.