Financial development index and economic growth: empirical evidence from India

Abstract

Purpose -The purpose of this paper is to construct a financial development index (FDI) for the Indian economy and also examine the relationship between FDI and economic growth. Design/methodology/approach -Augment Dickey Fuller, Phillips Perron and Ng Perron unit root tests are employed in order to determine the level of integration. The long-and short-run dynamics are obtained by using auto-regressive distributed lag approach to cointegration and rolling window approach to estimate coefficient of each observation. Findings -The results indicate that long-run relationship is presented among the economic growth, FDI, real-interest rate (RIR), labor force and capital. But FDI negatively associated with economic growth in the case of long-and short-run and RIR also negatively determine the economic growth only in the long run. The rolling regression result confirms that FDI negatively associated to growth in the

Does Financial Development Hamper Economic Growth: Empirical Evidence From Bangladesh

“…Khan and Qayyum (2007) found a1 percent increase in RIR and FDI enhances economic growth by 0.03 and 1.029% respectively in Pakistan; and Kar et al (2008) found a 1% increase in FDI promotes economic growth by 0.015% for Turkey. Hye (2011) found 1% increase in RIR and financial indicator enhances economic growth in China by 0.015 and 0.25%, respectively (all interpretations are on an average and ceteris paribus). The present paper rejects the positive relationship between finance and economic growth in Bangladesh found earlier by Rahman (2004Rahman ( , 2007.…”

“…This result is consistent with the findings of Hye (2011) for India but not with those found by Khan and Qayyum (2007) for Pakistan, and Hye and Dolgopolova (2011) for China. Hye's (2011) estimates suggest that a 1% increase in RIR lowers economic growth by 0.04% in India. Khan and Qayyum, and Hye and Dolgopolova found that a 1% increase in RIR enhances economic growth by 0.03% in Pakistan and 0.015% in China, on average ceteris paribus.…”

“…Kar et al (2008) used three proxies of financial development (M1/Y; M1/M2 and M2/Y) 11 for financial liberalization index for Turkey. Hye (2011) constructed financial development index for India by using four proxy indicators of financial development -market capitalization of listed companies, liquid liabilities and domestic credit to private sector as a percentage of GDP, and M2/M1.…”

Nexus between Economic Growth, Investment, and Islamic Banking Development: The Case of Dual Banking System

“…The large strand of the previous literature is focused on examining the correlation between FD and growth. The majority of this literature established a positive relationship (Adna Hye, 2011;Agbetsiafia, 2004;Atindehou et al, 2005;Beck & Levine, 2004;Campos et al, 2012;Ciftci et al, 2017;Herwatz & Walle, 2014;Jalil & Ma, 2008;Levine & Zervos, 1998;Pradhan, 2014;Pradhan et al, 2017;Zhang et al, 2012). In contrast, Hye and Islam (2013) and Narayan and Narayan (2013) found a negative relationship.…”

Dynamics of Financial Development and Economic Growth: Panel Data Analysis for Selected Indian States

“…In another study, Acharya et al (2009) investigated the relationship between the financial development and economic growth in different sets of Indian states including BIMARU and nine other states using the credit outstanding as an indicator of financial development and confirmed the relationship between financial development and growth in Indian states. Hye (2011) identified the relationship between financial development and economic growth by constructing an index of financial development including four financial variables. The findings of the study suggested that during most of the years the index negatively related with economic growth of the country.…”