Banks, Financial Markets and Economic Development: some evidence for India by

Subrahmanyam Ganti () and Kalluru Siva Reddy ()
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Subrahmanyam Ganti: Indian Institute of Management (IIM)
Kalluru Siva Reddy: Gokhale Institute of Politics and Economics

Journal of Quantitative Economics, 2022, vol. 20, issue 3, No 8, 693-700

Abstract: Abstract The stages of economic- development model postulates that an emerging economy passes through a structural transformation process from a traditional agrarian structure to a service-sector oriented stage via the industrial stage. In this process, the financial system plays a significant role, first through the bank-oriented financing to a market-oriented financing of the development process. The development process is said to pass through the bank-oriented stage to a more market- oriented stage via the market-oriented stage. In this process, the bank-oriented and the market-oriented stages of financing are said to become complementary sources of finance from a substitutive role. The objective of this study is to empirically verify this hypothesis in a production function framework for the Indian economy. For this purpose we employ a variable-elasticity of substitution function-which is a special case of the translog production function of Christensen, Jorgenson and Lau (1973). Our empirical results suggest evidence from a disappearing role of substitutability into a complementarity between the two sources of finance in India for the period 1992-93 to 2018-19.

Keywords: Financial structure; Stages of Economic Development; Production function; India; G10; G21; O16 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s40953-022-00318-7

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