Impact of macroeconomic volatility and economic policy uncertainty on credit growth and risk in vietnamese commercial banking sector

Abstract

This study investigates the impacts of macroeconomic volatility, economic policy uncertainty on short-term, medium-term, and long-term credit growth, as well as the overall financial stability of Vietnam's commercial banking sector. Analyzing data from 26 commercial banks in Vietnam from 2010 to 2022, this research endeavors to explain how volatilities in macroeconomic conditions, particularly heightened during periods of economic policy uncertainty, adversely influence credit expansion and financial stability. The study reveals that macroeconomic instabilities exert a detrimental effect on the financial robustness of commercial banks. Notably, fluctuations in GDP growth emerge as the most substantial and negatively impactful factor. This instability in GDP growth profoundly affects credit growth in short-term, medium-term, and long-term periods. The impact of macroeconomic instability factors on credit growth is pronounced in the short and medium term and ten0064 s to diminish over the long term. Consequently, this research underscores the criticality of maintaining economic growth stability for ensuring the resilience of the commercial banking system in Vietnam.