The Impact of Bank Credit on Economic Growth in Lao PDR

Philavanh Homsombath, Keuangkham Sisengnam, Vannasinh Souvannasouk (vannasinhnoummin@gmail.com) and Sengsulixay Sykhanthong
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Philavanh Homsombath: Faculty of Economics and Management, Champasack University, Lao PDR
Keuangkham Sisengnam: Faculty of Economics and Business Administration, National University of Laos, Lao PDR
Vannasinh Souvannasouk: Scientist Research and Academic Office Service, Champasack University, Lao PDR, Postal: Scientific Academic Research Service Office, Champasack University, Lao PDR
Sengsulixay Sykhanthong: Faculty of Economics and Management, Champasack University, Lao PDR

Asian Journal of Applied Economics/ Applied Economics Journal, 2024, vol. 31, issue 2, 135-144

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).

Keywords: bank credit; economic growth; ARDL bound test; Error Correction Model (search for similar items in EconPapers)
JEL-codes: E51 O16 O47 (search for similar items in EconPapers)
Date: 2024
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