Law, Institutions and Finance: Time Series Evidence from India
20 Pages Posted: 4 Jul 2007 Last revised: 27 Apr 2010
Date Written: August 1, 2007
Abstract
This paper revisits the financial development - economic growth puzzle from the perspective of the determinants of financial sector growth such as legal and institutional developments and financial regulation. We quantify the impact of these factors on financial sector and economic growth with the help of innovative time series indices that measure legal and institutional developments and financial regulation in India. Within a multivariate VAR framework, Granger Causality (GC) test and Vector Error Correction Model (VECM) are employed to investigate the long run causal relationships between the determinants and the financial sector. Our results show that legal and institutional developments and financial regulation cause financial sector growth with a considerable feedback and further financial sector weakly causes economic growth. Thus this paper completes the causal chain of links where legal and institutional development and regulatory measures cause economic growth by enhancing the financial sector.
Keywords: Law and Finance, Economic Growth, Granger causality, Vector Error Correction Models
JEL Classification: O16, E44, C32
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Financial Dependence and Growth
By Raghuram G. Rajan and Luigi Zingales
-
Stock Markets, Banks, and Growth: Panel Evidence
By Thorsten Beck and Ross Levine
-
Stock Markets, Banks, and Growth: Panel Evidence
By Thorsten Beck and Ross Levine
-
Stock Markets, Banks, and Economic Growth
By Ross Levine and Sara Zervos
-
Financial Development and Economic Growth: Views and Agenda
By Ross Levine
-
Stock Markets, Banks, and Growth: Correlation or Causality
By Thorsten Beck and Ross Levine
-
By Thorsten Beck, Asli Demirgüç-kunt, ...
-
Finance, Firm Size, and Growth
By Thorsten Beck, Asli Demirgüç-kunt, ...
-
Finance, Firm Size, and Growth
By Thorsten Beck, Asli Demirgüç-kunt, ...
-
Financial Intermediation and Growth: Causality and Causes
By Ross Levine, Norman Loayza, ...