Using contemporary models this paper explores the time-series properties of financial infrastructure and economic growth indicators to investigate the nexus between developments in financial intermediation with the economic growth for India over the 1971-2004 periods. Both over short-run and the long-run perspective the paper seeks to answer; whether the financial infrastructure variables are complementary or a substitute for economic performance? and in what way economic growth is affected by the financial infrastructural development indicators? We find evidence in favor of a short run “financial infrastructure led economic growth”. Finance is found to be a leading sector only in the short-term link in Granger causality tests with stationary variables. The study provides robust empirical evidence in favor of supply leading hypothesis for the Indian economy.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
6154.
Find related papers by JEL classification: G2 - Financial Economics - - Financial Institutions and Services C5 - Mathematical and Quantitative Methods - - Econometric Modeling E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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