Does financial development improve economic growth? The role of asymmetrical relationships

Shveta Singh, Vandana Arya, Miklesh Prasad Yadav and Gabriel J. Power

Global Finance Journal, 2023, vol. 56, issue C

Abstract: This paper investigates the impact of financial development on economic growth in India, a major emerging economy. We estimate more flexible models than typically found to capture potentially asymmetric relationships while accounting for trade openness, foreign direct investment, and technological development. We document a cointegrating and asymmetric relationship between the key variables using nonlinear and standard autoregressive distributed lag models. We find a consistently negative impact of financial development and foreign inflows on economic growth in India in the long and short run, while trade liberalization and technological development have positive effects. Our findings, therefore, suggest caution regarding financial market liberalization in India.

Keywords: Growth; Financial development; Foreign direct investment; Technological innovation; Asymmetry; Cointegration (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:56:y:2023:i:c:s1044028323000261

DOI: 10.1016/j.gfj.2023.100831

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