Integration between Economic Growth and Financial Development in India: An Analysis

A., Rjumohan (2019): Integration between Economic Growth and Financial Development in India: An Analysis.

Abstract

About 50 years back, Raymond Goldsmith sought to document the relationship between financial and economic development. Since then, the enquiry has witnessed promising progress with a growing literature highlighting a strong positive link between the financial system and economic growth. The present study is a modest attempt at an empirical substantiation of the relationship between economic growth and financial development in the context of India. Evidently, the analysis is based on time series data on economic growth and indicators of financial development pertaining to India. Hence the first section of this study discusses the time series econometric methods that are utilized in the analysis of this study. The second section seeks to analyze the objective of this study, viz., assessing whether there exists a long-run equilibrium between economic growth and financial development in India. Using the conventional Johansen-Juselius cointegration test and the modern ARDL-based bounds test as well as the conventional Granger-causality tests, we show that there does exist a long-run relationship between the economic and financial variables in the face of the external sector indicators.

• Item Type: MPRA Paper
• Language: English
• Keywords: Stock market, Economic growth, Integration, India, Econometric analysis.
• Subjects: G - Financial Economics > G1 - General Financial Markets; G - Financial Economics > G2 - Financial Institutions and Services; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance

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