Financial Development and Economic Growth Nexus: A Time Series Evidence from India

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Title Financial Development and Economic Growth Nexus: A Time Series Evidence from India
Author Singh, Tarlok
Journal Name Applied Economics
Editor Mark P. Taylor
Year Published 2008
Place of publication Oxford, UK
Publisher Routledge
Abstract This study examines the relationship between financial development and economic growth in India for the period 1951–52 to 1995–96. The long-run equilibrium and short-run dynamic models are estimated using financial interrelations ratio and new issue ratio as the measures of financial development, a la Goldsmith (1969). The Johansen (1991) estimator rejects the null of zero cointegrating vector and shows the presence of long-run equilibrium relationship between financial development and economic growth. The error correction model, impulse response and variance decomposition analyses (Sims, 1980), and the Toda and Yamamoto (1995) estimator show the presence of bidirectional Granger-causality between financial development and economic growth. The presence of bidirectional Granger-causality suggested by these estimators points towards the possible problem of endogeneity and simultaneity bias in the growth models that examine the contemporaneous effect of financial development on economic growth. The economic reforms that started since July 1991 emphasized on the liberalization and development of financial sector to supplement the efforts aimed at achieving high economic growth in India.
Peer Reviewed Yes
Published Yes
Alternative URI http://dx.doi.org/10.1080/00036840600892886
Volume 40
Issue Number 12
Edition 2008
Page from 1615
Page to 1627
ISSN 0003-6846
Date Accessioned 2008-06-26
Language en_AU
Research Centre Griffith Asia Institute
Faculty Griffith Business School
Subject PRE2009-Finance Economics
URI http://hdl.handle.net/10072/22345
Publication Type Journal Articles (Refereed Article)
Publication Type Code c1

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