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India¡¯s Finance-Growth Nexus: Cointegration and Causality Analysis with Income Inequality and Globalization

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  • Takashi Fukuda

Abstract

This paper investigates India¡¯s finance-growth nexus¨Dthe relationship between financial development and economic growth¨Dtaking the weakly exogenous variables of income inequality, trade openness and financial openness together with the structural break dummy into the cointegration analysis of the vector error correction model. Implementing the Granger causality tests we have detected that both financial size and financial efficiency exhibit a negative impact on economic growth with no feedback from the latter to each of the former. It is important for policy makers to recognize that finance does not always promote economic growth, considering how to convert the effect of financial development from ¡°growth-retarding¡± to ¡°growth-enhancing¡±.

Suggested Citation

  • Takashi Fukuda, 2018. "India¡¯s Finance-Growth Nexus: Cointegration and Causality Analysis with Income Inequality and Globalization," Applied Economics and Finance, Redfame publishing, vol. 5(6), pages 12-22, November.
    • Handle: RePEc:rfa:aefjnl:v:5:y:2018:i:6:p:12-22
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    References listed on IDEAS

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    More about this item

    Keywords

    India; finance-growth nexus; income inequality; globalization; cointegration; VECM;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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