قانون، مقررات و نهادها برای توسعه مالی: شواهدی از هند

This paper revisits the “finance–growth” thesis from the perspective of the determinants of financial sector growth such as legal and institutional developments and financial regulation in the Indian context. With the help of newly constructed indices of procedural law, regulation and institutional development, within a multivariate VAR framework, Granger causality tests and policy simulations are employed to investigate the long run causal relationships between the determinants and the financial sector. The results show that legal and institutional developments and financial deregulation cause financial sector growth with a considerable feedback and further finance causes economic growth.

The finance–growth nexus has been one of the most vibrant research issues in economics in recent years. The basic question is whether financial sector causes economic growth or the causality runs the other way or whether there are any other factors that cause both financial sector growth and economic growth. Recent literature surveys conclude that financial sector is a catalyst for economic growth (Levine, 1997, Levine, 2005 and World Bank, 1989). Understanding the institutional environment for financial sector development has recently attracted considerable attention from both theorists and empiricists (Fergusson, 2006 and Beck & Levine, 2003). One such school, ‘Law and Finance’, emphasises the differences in legal origin in explaining the difference in financial sector development across countries (La Porta et al., 1997, La Porta et al., 1998 and Djankov et al., 2007).

The objective of the paper is to explore the long run relationship between financial sector and its determinants namely law, financial regulation and institutions in Indian context. Conceptually this paper draws out the importance of support structure i.e. procedural law along with substantive law. Methodological improvements over the previous studies in this strand of literature include the attempt to provide the evidence of long run cointegrating relationship and establish the direction of causality between law, finance and growth in the Indian context. Further, a number of alternate specifications of the variables and econometric techniques, and policy simulations are employed to show the robustness the results.