Bank, Market and Economic Growth

Does financial system of South Asian countries perform a passive role in economic growth? Can we specify any particular channel that can boost economic development more efficiently? Does the intra and interrelationship among the major segments of financial system point to any change in the structure in near future? These are the major issues that we have examined in detail in the present article. Our findings suggest that though finance is an important determinant of growth, it is also influenced by the economic development in the South Asian countries. Structure of financial system and channel that influences economic growth varies. Banking sector and equity market perform a complementary role in the growth process. Although all countries under the study are less developed, we observed that their reliance on capital market cannot be considered as exception. There is also a faint indication of gradual domestic integration of financial system of the sample countries.