This study explores the relationship between financial growth and economic development in India using time series data over the period 1950-2007. The majority of the previous studies on this subject have used cross-sectional data, which may not address country specific issues. In addition, many studies used either OLS technique of estimation or bi-variate causality test and may, therefore suffer from the omission-of variable bias. This study attempts to examine the dynamic relationship between financial growth and economic development by including a range of financial variables like, quasi money for monetization, domestic credit for financial intermediation activities and bank asset for financial intermediary institutions. The casual relationship between economic development and financial growth indicators was examined with the help of Granger-Causality procedure based on Unrestricted Vector Auto Regression using the error correction term. The result from the cointegration tests indicates that financial development has a long-run equilibrium with economic growth. The financial sector and real sector move and evolve together in the same direction. The error correction model suggests that, in the short-run, the output variable is the only effective adjustment factor in the system that responds to the fluctuations of financial measures and domestic capital formation. On the other hand, the response of financial intensities and investments are sluggish adjustments that correct the deviation from equilibrium. In nutshell, this study shows that India’s financial development and economic growth are positively correlated; the process of economic development is not sustainable without the contributions of the financial sector and vice versa.
Inhaltsverzeichnis (Table of Contents)
- Background of Finance-Growth Nexus
- Trends of financial growth and economic development in India
- Finance-Growth Nexus: The Indian Experience
- Objective of the study
- Literature Review
- Data Description
- Theory, Empirical Model and Methodology
- Empirical model specification and estimation technique
- Stationarity Test
- Cointegration Test
- Vector Error Correction Estimate
- Granger Causality using Unrestricted VAR
- Results and Interpretations
- Stationarity Test
- Cointegration Test
- Vector Error Correction Estimate
- Granger Causality using Unrestricted VAR
- Conclusion
- Policy Implication
- Limitation and Scope of study
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This thesis examines the relationship between financial development and economic growth in India. The author aims to investigate the causal relationship between these two variables using co-integration and error correction model (ECM) techniques. The study analyzes both pre- and post-reform periods in India, aiming to understand the evolution of the finance-growth nexus over time.- Finance-Growth Nexus in India
- Impact of Financial Development on Economic Growth
- Causality Testing using Co-integration and ECM
- Analysis of Pre- and Post-Reform Periods
- Policy Implications for Financial Sector Development
Zusammenfassung der Kapitel (Chapter Summaries)
- Chapter 1: This chapter provides a background on the theoretical framework of the finance-growth nexus and introduces the key concepts related to financial development and economic growth. It also discusses the significance of studying the relationship in the context of India.
- Chapter 2: This chapter examines the trends of financial growth and economic development in India. It analyzes the key indicators of financial development and economic growth and explores the historical evolution of these trends in India. The chapter also highlights the specific characteristics of the Indian financial sector.
- Chapter 3: This chapter presents a comprehensive literature review on the finance-growth nexus. It discusses different theoretical models and empirical studies that have explored the relationship between finance and growth. It critically analyzes the existing literature and identifies key findings and gaps in the research.
- Chapter 4: This chapter describes the data used in the study. It outlines the sources of data, the specific variables used, and the time period covered in the analysis. The chapter also explains the methodologies employed for data collection and processing.
- Chapter 5: This chapter presents the theoretical framework, empirical model, and methodologies employed in the study. It discusses the co-integration and error correction model (ECM) techniques used to analyze the causal relationship between finance and growth. The chapter also provides a detailed explanation of the stationarity test, co-integration test, and Granger causality test used in the analysis.
- Chapter 6: This chapter presents the results of the empirical analysis and interprets the findings. It discusses the results of the stationarity test, co-integration test, vector error correction estimate, and Granger causality test. It analyzes the direction and magnitude of the causal relationship between financial development and economic growth in India. The chapter also analyzes the results for both pre- and post-reform periods.
Schlüsselwörter (Keywords)
This study focuses on the finance-growth nexus in India, examining the causal relationship between financial development and economic growth using co-integration and error correction model (ECM) techniques. The study analyzes data from both pre- and post-reform periods in India. Key terms and concepts include financial development, economic growth, causality, co-integration, ECM, stationarity test, Granger causality, pre-reform, post-reform, and Indian economy.- Quote paper
- Manoj Dora (Author), 2009, Finance-Growth Nexus: Evidence from Indian Economy using Causality Co-Integration Test based on Error Correction Model, Munich, GRIN Verlag, https://www.grin.com/document/137673
