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Financial development, industrialization, the role of institutions and government: a comparative analysis between India and China

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  • Muhammad Shahbaz
  • Mita Bhattacharya
  • Mantu Kumar Mahalik

Abstract

This research is the first comparative attempt incorporating the role of economic, demographic, sectoral contribution, government and trade in explaining financial development for India and China. Using time-series estimations, we establish that institutional quality and government size impede financial development, whereas urbanization, industrialization and service sector growth help in financial development for both countries. Trade openness also enhances Indian financial development but hinders Chinese financial development. We suggest that the policy advisers should not underestimate the role of urbanization, industrialization and service sector growth in implementing financial development. Finally, we find that the institutions and governments will play a key role for both economies in enhancing finance and growth.

Suggested Citation

  • Muhammad Shahbaz & Mita Bhattacharya & Mantu Kumar Mahalik, 2018. "Financial development, industrialization, the role of institutions and government: a comparative analysis between India and China," Applied Economics, Taylor & Francis Journals, vol. 50(17), pages 1952-1977, April.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:17:p:1952-1977
    DOI: 10.1080/00036846.2017.1383595
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    Cited by:

    1. Atil, Ahmed & Nawaz, Kishwar & Lahiani, Amine & Roubaud, David, 2020. "Are natural resources a blessing or a curse for financial development in Pakistan? The importance of oil prices, economic growth and economic globalization," Resources Policy, Elsevier, vol. 67(C).
    2. Khraief, Naceur & Shahbaz, Muhammad & Mahalik, Mantu Kumar & Bhattacharya, Mita, 2021. "Movements of oil prices and exchange rates in China and India: New evidence from wavelet-based, non-linear, autoregressive distributed lag estimations," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 563(C).
    3. Mougnol A Ekoula, Hervé William & Kamguia, Brice & Ndoya, Hermann, 2023. "Do women hold the key to financial sector development in Africa?," International Economics, Elsevier, vol. 173(C), pages 233-248.
    4. Liang, Xuefang & Qianqian, Ding & Xiaozhou, Zhu & Ullah, Midrar, 2024. "Asymmetric relationship between natural resources extraction policy and financial development exist? A conflict and comparative analysis between China and US," Resources Policy, Elsevier, vol. 90(C).
    5. Mantu Kumar Mahalik & John Nkwoma Inekwe & Kuntal Kumar Das & Umakant Dash & Augustine C. Arize, 2022. "Does the pattern of age dependency matter in the promotion of financial development in an emerging economy?," Applied Economics, Taylor & Francis Journals, vol. 54(48), pages 5622-5637, October.
    6. Tékam Oumbé, Honoré & Djeunankan, Ronald & Kos A Mougnol, Alice, 2024. "Analysing the effect of foreign aid on industrialization: Evidence from Africa," International Economics, Elsevier, vol. 178(C).
    7. Amjad Taha & Mucahit Aydin & Taiwo Temitope Lasisi & Festus Victor Bekun & Narayan Sethi, 2023. "Toward a sustainable growth path in Arab economies: an extension of classical growth model," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-24, December.
    8. Evans, Olaniyi, 2018. "Blockchain Technology and the Financial Market: An Empirical Analysis," MPRA Paper 99212, University Library of Munich, Germany.
    9. Nasreen, Samia & Mahalik, Mantu Kumar & Shahbaz, Muhammad & Abbas, Qaisar, 2020. "How do financial globalization, institutions and economic growth impact financial sector development in European countries?," Research in International Business and Finance, Elsevier, vol. 54(C).
    10. Stolbov, Mikhail & Shchepeleva, Maria, 2020. "What predicts the legal status of cryptocurrencies?," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 273-291.
    11. Evans, Olaniyi, 2020. "Fiscal Discipline, Financial Development & Economic Growth in Nigeria," MPRA Paper 99242, University Library of Munich, Germany.
    12. Zhang, Xiaoli & Ahmad, Maaz & Gu, Xiao, 2024. "The Dual Faces of growth: Linear and non-linear effects of industrialization, financial development and natural resource rents on China's economy," Resources Policy, Elsevier, vol. 95(C).
    13. Hongzhong Fan & Md Ismail Hossain, 2018. "Technological Innovation, Trade Openness, CO2 Emission and Economic Growth: Comparative Analysis between China and India," International Journal of Energy Economics and Policy, Econjournals, vol. 8(6), pages 240-257.
    14. Sosson Tadadjeu & Brice Kamguia & Ronald Djeunankan, 2023. "Access to drinking water and sanitation in developing countries: Does financial development matter?," International Review of Applied Economics, Taylor & Francis Journals, vol. 37(4), pages 457-481, July.
    15. Huo, Chunhui & Hameed, Javaria & Albasher, Gadah & Pang, Ming, 2023. "The impact of institutional quality, natural resources, and finance-growth on China's economic recovery: An empirical study," Resources Policy, Elsevier, vol. 83(C).
    16. Shreya Pal, 2023. "Does Remittance and Human Capital Formation Affect Financial Development? A Comparative Analysis Between India and China," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 30(2), pages 387-426, June.
    17. Ullah, Atta & Pinglu, Chen & Ullah, Saif & Qaisar, Zahid Hussain & Qian, Ningyu, 2022. "The dynamic nexus of E-Government, and sustainable development: Moderating role of multi-dimensional regional integration index in Belt and Road partner countries," Technology in Society, Elsevier, vol. 68(C).
    18. Gouthami Kothakapa & Samyukta Bhupatiraju & Rahul A. Sirohi, 2021. "Revisiting the link between financial development and industrialization: evidence from low and middle income countries," Annals of Finance, Springer, vol. 17(2), pages 215-230, June.
    19. Hlalefang Khobai & Clement Moyo, 2021. "Trade openness and industry performance in SADC countries: is the manufacturing sector different?," International Economics and Economic Policy, Springer, vol. 18(1), pages 105-126, February.
    20. Shuanglian Chen & Gaoke Liao & Benjamin M. Drakeford & Pierre Failler, 2019. "The Non-Linear Effect of Financial Support on Energy Efficiency: Evidence from China," Sustainability, MDPI, vol. 11(7), pages 1-16, April.
    21. Tongurai, Jittima & Vithessonthi, Chaiporn, 2023. "Financial openness and financial market development," Journal of Multinational Financial Management, Elsevier, vol. 67(C).
    22. Djeunankan, Ronald & Tadadjeu, Sosson & Kamguia, Brice, 2024. "Linking energy poverty and industrialization: Empirical evidence from African countries," Energy, Elsevier, vol. 292(C).

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