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‘Finance-Growth’ Nexus in India Through the Evolutionary Phases of Banking

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  • Saptarshi Mitra

    (CMR University, OMBR Layout)

Abstract

To the existing approach of studying how financial intermediation could be linked to the economic growth of a developing country, present study offers an alternative investigative framework by considering the public and private sector investments in case of the emerging Indian economy. Besides, it also investigates how such relationship has actually evolved over-time by considering the years following Nationalisation in 1969 and Liberalisation in 1991. Using the time-series methodology of cointegration and vector error correction, this paper studied data on Indian economy from 1951 to 2017 and utilises impulse response function of the variables for understanding the effect. It finds strong evidence in favour of the Schumpeterian view and observes that ‘nationalisation’ has negative impact on economic growth while ‘liberalisation’ impacted the same positively.

Suggested Citation

  • Saptarshi Mitra, 2022. "‘Finance-Growth’ Nexus in India Through the Evolutionary Phases of Banking," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(2), pages 401-419, June.
    • Handle: RePEc:spr:jqecon:v:20:y:2022:i:2:d:10.1007_s40953-022-00290-2
    DOI: 10.1007/s40953-022-00290-2
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    More about this item

    Keywords

    Financial institutions; Economic growth; Policy; Cointegration; VECM; Impulse response function;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General

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