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Impact of Financial Deepening on Economic Growth in Indian Perspective: ARDL Bound Testing Approach to Cointegration

Author

Listed:
  • Vipin Ghildiyal
  • A.K Pokhriyal
  • A.K Pokhriyal
  • Arvind Mohan

Abstract

The present work is an attempt to investigate into the causal impact of financial deepening on economic growth in case of India. For analyzing the long term equilibrium relationship between the desired variables, we have employed Autoregressive Distributed Lag (ARDL) Bound testing approach. ARDL being a new approach is an improvement over the other traditional techniques of cointegration. Further, using the Granger Error Correction Model (ECM) technique we have tried to estimate the causal impact in the short run also. The findings suggest that there exist an equilibrium relationship in long run between financial deepening and economic development. Results suggested that financial deepening causes economic growth in the long run and also in the short run. Therefore, it is concluded that for enhancing the economic growth the government has to take effort to improve the financial deepening. Special efforts should be put to provide easy credit to private sector, stock market development and also to foster foreign trade.

Suggested Citation

  • Vipin Ghildiyal & A.K Pokhriyal & A.K Pokhriyal & Arvind Mohan, 2015. "Impact of Financial Deepening on Economic Growth in Indian Perspective: ARDL Bound Testing Approach to Cointegration," Asian Development Policy Review, Asian Economic and Social Society, vol. 3(3), pages 49-60.
    • Handle: RePEc:asi:adprev:v:3:y:2015:i:3:p:49-60:id:402
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    Citations

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    Cited by:

    1. Mesut Alper GEZER, 2018. "The relationship between financial deepening and economic growth: Bootstrap causality approach for the selected upper middle income countries," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(1(614), S), pages 95-112, Spring.
    2. Rajendra Maharjan, 2020. "Causality between Financial Development and Economic Growth in Nepal," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 32(2), pages 29-44, October.
    3. Deng, Xiang & Xu, Fang, 2024. "Asymmetric effects of international oil prices on China's PPI in different industries——Research based on NARDL model," Energy, Elsevier, vol. 290(C).
    4. Ademola Obafemi Young, 2019. "Growth Impacts of Income Inequality: Empirical Evidence From Nigeria," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 226-262, December.
    5. Gbenga F. BABARINDE, 2020. "Growth Effects Of Foreign Direct Investment And Financial Deepening In Nigeria (1981-2018)," Business Excellence and Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 10(4), pages 49-67, December.
    6. Babatunde Wasiu ADEOYE & Ojo Samson ISUMAILA, 2022. "Stock Market Liquidity And Economic Growth: Empirical Evidence From Nigeria," Romanian Journal of Economics, Institute of National Economy, vol. 54(1(63)), pages 80-94, June.
    7. Gulshan Kumar & Shallu Batra, 2023. "Interrelationship Between Human Development, Financial Development and Economic Growth: Empirical Evidences from Indian Economy," Indian Journal of Human Development, , vol. 17(1), pages 60-81, April.

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