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Do Financial Sector Policies Promote Innovative Activity in Developing Countries? Evidence from India

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  • Ang, James

Abstract

This paper attempts to shed some light on the role of financial sector policies in generating new knowledge, drawing on the experience of one of the fastest growing and largest developing countries. Using relatively long time series data, the results in this paper indicate that interest rate restraints help generate knowledge in India’s economy. Other financial repressionist policies, in the form of high reserve and liquidity requirements as well as significant directed credit controls, appear to have a dampening effect on ideas production. The results lend some support to the argument that some form of financial sector reforms may help stimulate economic growth via increasing innovative activity.

Suggested Citation

  • Ang, James, 2009. "Do Financial Sector Policies Promote Innovative Activity in Developing Countries? Evidence from India," MPRA Paper 14495, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:14495
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    File URL: https://mpra.ub.uni-muenchen.de/14495/1/MPRA_paper_14495.pdf
    File Function: original version
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    References listed on IDEAS

    as
    1. Madsen, Jakob B. & Saxena, Shishir & Ang, James B., 2010. "The Indian growth miracle and endogenous growth," Journal of Development Economics, Elsevier, vol. 93(1), pages 37-48, September.
    2. de la Fuente, Angel & Marin, JoseMaria, 1996. "Innovation, bank monitoring, and endogenous financial development," Journal of Monetary Economics, Elsevier, vol. 38(2), pages 269-301, October.
    3. Demetriades, Panicos O. & P. Devereux, Michael & Luintel, Kul B., 1998. "Productivity and financial sector policies: Evidence from South East Asia," Journal of Economic Behavior & Organization, Elsevier, vol. 35(1), pages 61-82, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Veysov, Alexander & Stolbov, Mikhail, 2011. "The impact of financial sector on innovation activity: theoretical background and new evidence from russian banking sector," MPRA Paper 38747, University Library of Munich, Germany.
    2. Behera, Smruti Ranjan Behera & Dua, Pami Dua & Goldar, Bishwanath Goldar, 2012. "Horizontal and Vertical Technology Spillover of Foreign Direct Investment: An Evaluation across Indian Manufacturing Industries," MPRA Paper 43293, University Library of Munich, Germany.
    3. repec:wsi:serxxx:v:57:y:2012:i:02:n:s0217590812500117 is not listed on IDEAS
    4. Smruti Ranjan Behera & Pami Dua & Bishwanath Goldar, 2012. "Foreign Direct Investment And Technology Spillover: Evidence Across Indian Manufacturing Industries," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 57(02), pages 1-23.
    5. smruti, Smruti Ranjan Behera, 2012. "Technology Spillover and Determinants of Foreign Direct Investment: An Analysis of Indian Manufacturing Industries," MPRA Paper 42178, University Library of Munich, Germany.

    More about this item

    Keywords

    financial sector policies; innovative activity; endogenous growth; India;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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