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

Naliniprava Tripathy; Naliniprava Tripathy

doi:10.3934/QFE.2019.3.508

Quantitative Finance and Economics

2019, Volume 3, Issue 3: 508-525. doi: 10.3934/QFE.2019.3.508

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Research article

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

Naliniprava Tripathy ^,

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

Received: 26 May 2019 Accepted: 01 August 2019 Published: 07 August 2019
JEL Codes: C23, C58, E44, E51

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.
- 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?[J]. Quantitative Finance and Economics, 2019, 3(3): 508-525. doi: 10.3934/QFE.2019.3.508

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Abstract

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.

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