Export file:

Format

  • RIS(for EndNote,Reference Manager,ProCite)
  • BibTex
  • Text

Content

  • Citation Only
  • Citation and Abstract

Does measure of financial development matter for economic growth in India?

Indian Institute of Management Shillong, Mayurbhanj Complex, Nongthymmai Shillong, 793014, Meghalaya, India

The present study examines the impact of financial development on economic growth in India by using Auto-Regressive Distributed Lag (ARDL) model and the Generalized Method of Moment (GMM) model over 15 years from June 2003 to February 2018. The results of the study indicate that financial development has a positive and significant impact on economic progression both in short run and long run in India. The CUSUM test confirms the long-run stability relationship among them. Therefore, the study proposed that financial sector deepening should push ahead to augment economic growth of India. The outcomes of the study contribute to understanding the factors, which determine the economic and financial development competitive position. To foster economic and financial development, the suitable and harmonizing action required by both firms and policymakers. This study has a substantial impact on global and institutional investors to make better investment decisions in India.
  Figure/Table
  Supplementary
  Article Metrics

Keywords financial development; economic growth; ARDL Cointegration Test; GMM Model; CUSUM Test

Citation: Naliniprava Tripathy. Does measure of financial development matter for economic growth in India?. Quantitative Finance and Economics, 2019, 3(3): 508-525. doi: 10.3934/QFE.2019.3.508

References

  • 1.Abu-Badr S, Abu-Qarn AS (2008) Financial development and economic growth: The Egyptian experience. J Policy Model 30: 887–898.    
  • 2.Asongu SA (2012) Financial sector competition and knowledge economy: Evidence from. SSA and MENA countries. J Knowl Econ 6: 717–748.
  • 3.Arellano M, Bond S (1991) Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. Rev Econ Stud 58: 277–297.    
  • 4.Arellano M, Bover O (1995) Another Look at the instrumental variable estimation of error components models. J Economet 68: 29–51.    
  • 5.Bittencourt M (2012) Financial development and economic growth in Latin America: Is Schumpeter, right? J Policy Model 34: 341–355.    
  • 6.Breitung J (2000) The local power of some unit root tests for panel data, In H.B. Baltagi (Ed.), Nonstationary panels, panel co-integration, and dynamic panels, Amsterdam, The Netherlands: JAI Press, 15: 161–178.    
  • 7.Cheng B (1999) Cointegration and causality between financial development and economic growth in South Korea and Taiwan. J Econ Dev 24: 1–24.
  • 8.Darret AF (1999) Are financial deepening and economic growth causality related? Another looks at the evidence. Int Econ J 13: 19–35.
  • 9.Dilek Durusu-Ciftci, Hakan Yetkiner (2017) Financial Development and Economic Growth: Some Theory and More Evidence. J Policy Model 39: 185–386.    
  • 10.Demetriades PO, Hussein K (1996) Does financial development cause economic growth? Time series Evidence from 16 countries. J Dev Econ: 51 387–411.
  • 11.Gan C (2006) Macroeconomic variables and stock market interactions: New Zealand evidence Investment Manage Financ Innovations 3: 89–101.
  • 12.Gurley J, Shaw E (1967) Financial Structure and Economic Development. Econ Dev Cultural Change 34: 333–346.
  • 13.Goldsmith RW (1969) Financial structure and development, New York: Yale University press.
  • 14.Greenwood J, Jovanovich B (1990) Financial development, growth and distribution of income. J Polit Econ 98: 1076–1107.    
  • 15.Hsueh SJ, Hu YH, Tu CH ( 2013) Economic growth and financial development in Asian countries: a boot strap panel Granger causality analysis. Econ Model 32: 294–301.
  • 16.Hadri K (2000) Testing for stationarity in heterogeneous panel data. Economet J 3: 148–161.    
  • 17.Humpe A, Macmillan P (2009) Can macroeconomic variables explain long-term stock market movements? A comparison of the US and Japan. Appl Financ Econ 19: 111–119.
  • 18.Habibullah MZ, Eng YK ( 2006) Does financial development cause economic growth? A panel data dynamic analysis for Asian developing countries. J Asian Pacific Econ 1: 377–393.
  • 19.Im K, Pesaran M, Shin Y (2003) Testing for unit roots in heterogeneous panels. J Economet 115: 53–74.    
  • 20.Kargbo SM, Adamu PA (2009) Financial development and Economic growth in Sierra Leone J Monetary Econ Integr 9: 30–61.
  • 21.King R, Levine R (1993) Finance, entrepreneurship and growth: Theory and evidence. J Monetary Econ 32: 513–543.    
  • 22.Kenourgios D, Samitas A (2007) Financial Development and Economic Growth in a Transition Economy: Evidence for Poland. J Financ Decis Making 3: 35–48.
  • 23.Lewis RE (1995) The Theory of Economic Growth, George Allen and Unwin London, UK.
  • 24.Levin A, Lin C, Chu J (2002) Unit root tests in panel data: Asymptotic and finite-sample properties. J Economet 108: 1–24.    
  • 25.Madala G, Wu S (1999) A comparative study of unit root tests with panel data and a new simple test. Oxf Bull Econ Stat 61: 631–652.
  • 26.Odhiambo NM (2008) Financial depth, savings and economic growth in Kenya: a dynamic causal relationship. Econ Model 25: 704–713.    
  • 27.Pesaran HM, Pesaran B (1997) Working with micro fit 4.0, New York: Oxford University Press.
  • 28.Pedroni P (2004) Panel co-integration: Asymptotic and finite sample properties of pooled time series tests with an application to the PPP hypothesis. Economet Theory 20: 597–625.
  • 29.Pesaran MH, Shin Y (1999) An autoregressive Distributed lag modeling approach to co-integration analysis, In S. Strong (Ed.), Chapter 11 in Econometrics and Economic Theory in the 20 the century: the Ragnar Frisch centennial symposium, Cambridge: Cambridge university press, 371–413.
  • 30.Pesaran MH, Shin Y, Smith RJ (2000) Structural analysis of vector error correction models with exogenous I (1) variables. J Economet 97: 293–343.    
  • 31.Pesaran MH, Shin Y, Smith RJ (2001) Bounds testing approaches to the analysis of level relationships. J Appl Economet 16: 289–326.    
  • 32.Patrick HT (1966) Financial development and economic growth in underdeveloped countries. Econ Dev Cultural Change 14: 174–189.
  • 33.Rajan RG, Zingales L (1998) Financial dependence and growth. Am Econ Rev 88: 559–586.
  • 34.Regmi UR (2012) Stock market development and economic growth: Empirical evidence from Nepal. Adm Manage Rev 24: 1–28.
  • 35.Rousseau PL, Wachtel P (2000) Equity markets and growth: Cross-country evidence on timing and outcomes, 1980–1995. J Banking Financ 24: 1933–1957.    
  • 36.Robinson J (1952)TheGeneralisation of the General Theory, in the Rate of Interest, and Other Essays, Second Edition, Macmillan, London.
  • 37.Schumpeter JA (1911) The Theory of Economic Development, Harvard University Press, Cambridge, MA.
  • 38.Sanogo V, Moussa R (2017) Financial Reforms, Financial Development, and Economic Growth in the Ivory Coast. Econ 5: 7–17.
  • 39.Abida Z, Sghaier IM, Zghidi N (2015) Financial Development and Economic Growth: Evidence from North African Countries. Econ Altern 6: 17–33.

 

Reader Comments

your name: *   your email: *  

© 2019 the Author(s), licensee AIMS Press. This is an open access article distributed under the terms of the Creative Commons Attribution Licese (http://creativecommons.org/licenses/by/4.0)

Download full text in PDF

Export Citation

Copyright © AIMS Press All Rights Reserved