The impact of the banking sector on economic structure and growth: Empirical evidence from Southeast Asia, 2022

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI MINH CITY

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LÊ PHƯƠNG THÙY

THE IMPACT OF THE BANKING SECTOR ON

ECONOMIC STRUCTURE AND GROWTH: EMPIRICAL

EVIDENCE FROM SOUTHEAST ASIA

GRADUATION THESIS

MAJOR: FINANCE – BANKING

CODE: 7340201

HO CHI MINH CITY, 2022

MINISTRY OF EDUCATION AND TRAINING STATE BANK OF VIETNAM

BANKING UNIVERSITY OF HO CHI MINH CITY

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LÊ PHƯƠNG THÙY

THE IMPACT OF THE BANKING SECTOR ON

ECONOMIC STRUCTURE AND GROWTH: EMPIRICAL

EVIDENCE FROM SOUTHEAST ASIA

GRADUATION THESIS

MAJOR: FINANCE – BANKING

CODE: 7340201

SUPERVISOR

NGUYỄN DUY LINH, Ph.D

HO CHI MINH CITY, 2022

COMMENT OF THE SUPERVISOR

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Ho Chi Minh City,…./…./2022

Supervisor

NGUYỄN DUY LINH

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ABSTRACT

The main goal of this research is to investigate how the development of a

banking sector (hereinafter "banking sector development") affects the growth,

development, and structure of Southeast Asian economies. The impact of the banking

sector development on the development of the industrial, agricultural, and service

sectors. At the same time, the study investigates whether economic structure and

growth aid in the development of the banking industry. The study, which runs from

2008 to 2020, is based on data from Southeast Asian countries. The Ordinary Least

Squares method and the Dynamic Ordinary Least Squares method were used

throughout the study, along with country-fixed effect and year-fixed effect. The final

results show that the relationship between the development of the banking system and

economic development and growth is a two-way relationship in which the impact of

agriculture, industry, and service sectors on the banking sector is significant. However,

in general, Southeast Asian countries should focus their resources on developing the

banking sector and the industrial sector.

Keywords: agricultural sector; banking sector; economic structure; economic

growth; industrial sector; service sector; Southeast Asia

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COMMITMENT

As the author of this graduate thesis, I hereby declare that:

My name is: Lê Phương Thùy

Currently a student in class HQ6-GE05, majoring in Finance and Banking,

Banking University of Ho Chi Minh City.

The topic of the internship report is: “The impact of the baning sector on economic

structure and growth: empirical evidence from Southeast Asia.”

This graduation thesis is done by me, with the help of the instructor, Mr.

Nguyen Duy Linh. The content in this graduation thesis is made based on my research

during my study time as well as from summarizing the knowledge I have learned while

studying at the school. The information, documents and data in this report are

completely honest and fully quoted, specific and clear.

I take full responsibility for this pledge, respectfully!

Ho Chi Minh City,…./…./2022

Author

Lê Phương Thùy

iii

ACKNOWLEDGEMENTS

First of all, I would like to thank the faculty of Finance, Banking University of

Ho Chi Minh City. In particular, I would like to thank Mr. Nguyen Duy Linh, the

lecturer who directly guided me during the internship and report writing process. His

enthusiastic guidance and practical suggestions helped me to complete this graduation

thesis.

I would also like to express my heartfelt thanks to my father and mother, who

have given up their time to care for me and who are usually busy from early morning

till late at night, so that I have valuable time to concentrate on my thesis and don't have

to worry about anything other than focusing on the thesis.

The report cannot avoid certain errors due to time constraints, reasoning level,

and personal experience. I eagerly await teacher feedback to help me enhance my

research.

Finally, I would like to wish the teachers of the Faculty of Finance at the Banking

University of Ho Chi Minh City good health and success in their teaching work.

I wish the leadership, uncles, and brothers and sisters at the Thu Duc branch good

health, success in their work, and a dedication to the banking industry.

Ho Chi Minh City, …./…./2022

Author

Lê Phương Thùy

iv

Table of Contents

ABSTRACT......................................................................................................................i

COMMITMENT..............................................................................................................ii

ACKNOWLEDGEMENTS ........................................................................................... iii

LIST OF ABBREVIATIONS...................................................................................... viii

LIST OF FIGURES.........................................................................................................ix

LIST OF TABLES ...........................................................................................................x

CHAPTER 1: INTRODUCTION ....................................................................................1

1.1 The importance of research topic ...................................................................1

1.2 An overview of the research ............................................................................3

1.3 The research's objective...................................................................................4

1.3.1 Overall objectives.......................................................................................4

1.3.2 Specific objectives......................................................................................4

1.4 Research questions ...........................................................................................4

1.5 Subject and scope of the study ........................................................................5

1.6 Research methods.............................................................................................5

1.7 Research contribution ......................................................................................6

1.7.1 Literature gap ............................................................................................6

1.7.2 New contributions......................................................................................6

1.8 Research structure............................................................................................7

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CONCLUSION CHAPTER 1..........................................................................................8

CHAPTER 2: THEORETICAL FRAMEWORK AND LITERATURE REVIEW........9

2.1 Theoretical framework.....................................................................................9

2.1.1 Banking sector development and economic growth ...............................9

2.1.2 Banking sector development and economic structure..........................11

2.2 Literature review ............................................................................................12

2.3 Hypothesis development.................................................................................16

CONCLUSION CHAPTER 2........................................................................................22

CHAPTER 3: RESEARCH METHODS .......................................................................23

3.1 Research process.............................................................................................23

3.2 Data and sample..............................................................................................24

3.3 Empirical methodology ..................................................................................29

CONCLUSION CHAPTER 3........................................................................................32

CHAPTER 4: RESEARCH RESULTS .........................................................................33

4.1 Descriptive statistics and univariate analysis...............................................33

4.2 Banking sector in Southeast Asia overview..................................................35

4.3 The effects of banking sector development on industrial sector,

agricultural sector and service sector development ..............................................37

4.3.1 The effects of banking sector development on industrial sector

development ...........................................................................................................37

4.3.2 The effects of banking sector development on agricultural sector

development ...........................................................................................................40