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- Title
Financial development and economic growth in India: some evidence from non-linear causality analysis.
- Authors
Nain, Md; Kamaiah, Bandi
- Abstract
In the light of the recent observation that the relationship between financial development and economic growth is one of non-linear and limitations of granger test, this paper re-examined relationship in the framework of non-linear Granger causality employing (Diks and Panchenko in Stud Nonlinear Dyn Econ 9(2), ) test. The limitation of non-stationarity of earlier study is also addressed using the Toda and Yamamoto (J Econ 66:225-250, ) test. The present study attempts to undertake this exercise, as causal inference is sensitive to the twin limitations of non-stationarity and non-linearity. We used principal component analysis to construct index of financial development comprising alternative measures of financial development. The analysis has been carried out for the period 1990-2010. The results of Toda-Yamamoto and Diks-Panchenko tests reveal that financial development and economic growth bear no causal relationship, a finding contrary to the findings of several of the existing studies in the Grangerian framework.
- Subjects
INDIAN economy, 1991-; GRANGER causality test; HEDGING (Finance); PORTFOLIO diversification; FINANCIAL risk management
- Publication
Economic Change & Restructuring, 2014, Vol 47, Issue 4, p299
- ISSN
1573-9414
- Publication type
Article
- DOI
10.1007/s10644-014-9151-5