Abstract
Relationship between financial development and economic growth is a long-debated issue. The objective of this study is to determine if a relationship exists between financial development and economic growth. Better functioning financial systems ease the external financing constraints that impede firm and industrial expansion. On the other hand, changes in economic activity and economic growth can influence financial systems. With the help of Principal Component Analysis, we develop two indices - one for ‘financial development’ and the other for ‘economic development’. Through a set regression equations, we find that the elasticity of ‘financial development’ with respect to ‘economic development is 0.37 and elasticity of ‘economic development’ with respect to ‘financial development’ is 1.69. The gains from financial development are much greater.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
