Reexamining the Finance–Growth Relationship for a Developing Economy: A Time Series Analysis of Post-reform India

Sabyasachi Kar and Kumarjit Mandal

Working Papers from eSocialSciences

Abstract: The cross-country empirical literature on the finance-growth relationship has debated three propositions: (i) financial deepening has a strong impact on the growth process; (ii) measures of financial “activity†rather than the “size†of the sector plays a more significant role in the growth process; and (iii) financial structure (bank-based versus stock market-based) has no impact on the growth process at all. The present study reexamines the validity of these propositions for a developing economy. These propositions are tested for the post-reform Indian economy using the modified Pantula principle associated with the Vector Error Correction Model (VECM) methodology. [IEG Working Paper No. 313]. URL:[http://www.iegindia.org/].

Keywords: Finance; Developing Economy; time series analysis; post-reform; India; finance-growth; financial structure; financial activity; Financial deepening; modified Pantula principle; goods and services; savings; banks; non-bank financial intermediaries; stock markets (search for similar items in EconPapers)
Date: 2012-07
Note: Institutional Papers
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Citations: View citations in EconPapers (5)

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