Abstract
The impact of financial development on economic growth has been documented in abundant studies recently. This paper examines the finance-growth relationship under the Vietnam's situation from two perspectives. First, I explore the growth and financial development relationship in Vietnam by comparing Vietnam’s data characteristics with that of other countries. Second, I apply Business Cycle Accounting (BCA) wedge methodology to explore the finance-growth causality in Vietnam. There are two major findings: (i) Vietnam’s relationship between income level changes and finance is stronger than relationship between economic growth rate and finance under global perspective; (ii) capital wedge which captures the evolution of financial development is the prime driving force of Vietnam’s output growth during 1998 to 2007 and the second important contribution during the whole studied period.