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The Impact of Bank Credit on Economic Growth in Lao PDR

Author

Listed:
  • Homsombath, Philavanh

    (Faculty of Economics and Management, Champasack University, Lao PDR)

  • Sisengnam, Keuangkham

    (Faculty of Economics and Business Administration, National University of Laos, Lao PDR)

  • Souvannasouk, Vannasinh

    (Scientist Research and Academic Office Service, Champasack University, Lao PDR)

  • Sykhanthong, Sengsulixay

    (Faculty of Economics and Management, Champasack University, Lao PDR)

Abstract

This study examines the impact of bank credit on economic growth in Lao PDR from 1992 to 2022 using data from the World Development Indicators and the Bank of Laos. Employing the Cointegration and Error Correction Model (ECM) with the autoregressive distributed lag (ARDL) bounds testing approach, the results reveal that labor and bank credit to the private sector positively influence economic growth in both the short and long term, while credit to state enterprises has a negative impact. The findings suggest that the government should incentivize commercial banks to increase private sector lending and impose stricter regulations on state enterprise credit to mitigate non-performing loans (NPLs).

Suggested Citation

  • Homsombath, Philavanh & Sisengnam, Keuangkham & Souvannasouk, Vannasinh & Sykhanthong, Sengsulixay, 2024. "The Impact of Bank Credit on Economic Growth in Lao PDR," Asian Journal of Applied Economics/ Applied Economics Journal, Kasetsart University, Faculty of Economics, Center for Applied Economic Research, vol. 31(2), pages 135-144, July-Dece.
    • Handle: RePEc:ris:apecjn:0106
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    More about this item

    Keywords

    bank credit; economic growth; ARDL bound test; Error Correction Model;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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