Abstract: This study examines the short-run relationship between financial market structure and economic growth in Vietnam using a vector autoregression (VAR) framework. Using annual data for the period 2000 to 2024, the analysis employs a dual-framework strategy combining standard Granger causality tests with the Toda-Yamamoto modified Wald procedure to distinguish short-run predictive dynamics from longer-horizon causal linkages. Standard Granger tests find no statistically significant short-run predictive relationships between financial development indicators and economic growth, while the Toda-Yamamoto procedure detects bidirectional causal linkages at conventional significance levels, indicating that the finance-growth relationship in Vietnam is real but deferred, operating through gradual capital reallocation channels rather than rapid contemporaneous transmission. Impulse response analysis confirms that peak GDP responses to financial shocks are modest, approximately +0.21 percentage points for a credit shock and +0.34 percentage points for a stock market shock, dissipating within four to five years and remaining statistically insignificant throughout. Forecast error variance decomposition shows that own-innovations account for over 96 per cent of short-run output variance at a one-year horizon. With Vietnam's domestic credit-to-GDP ratio exceeding 130 per cent by 2024, the findings suggest that the binding constraint on growth transmission has shifted from financial quantity to financial quality, underscoring the need to prioritise intermediation efficiency over continued quantitative expansion.

Keywords: Financial market structure, Economic growth, VAR, Toda-Yamamoto causality, Vietnam

Pages: 82-99

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