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Financial Intermediation and Growth: Bank-Based versus Market-Based Systems
Abstract
The article empirically evaluates the role of financial intermediation in India’s economic development. An assessment of various indicators of financial development reveals that both the bank-based and market-based intermediation processes have undergone remarkable improvements in the last six decades. While credit disbursement by Indian banks has increased sharply in the past decades, it is still below the world average level and even below the level of its emerging market and developing economies (EDEs) peers. However, in recent years, the market capitalisation of the Indian stock market has increased indicating greater reliance on market-based sources of funding. One-way Granger causality from private sector credit to real GDP confirms the supply-leading process of bank intermediation, while no causality was found between stock market capitalisation and real GDP. The ARDL co-integration test suggests that both the bank-based and market-based financial deepening have positive roles in driving India’s economic development, while the former has a stronger role in driving India’s economic growth. The findings indicate that in a relatively bank-centric financial sector, Indian banks have the potential of further channelisation of credit to productive sectors of the economy. JEL Classification: G2, O16, C32
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“Additionally, the present study findings are in line with the previous arguments which are that sound financial sectors of a country contribute to economic growth significantly.”
From The effect of financial development on economic Growth: Evidence from south Asian developing countries (2022) · cites this paper as Sahoo, 2014
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Cited by
Sorted by citations
Bibi, R., & Sumaira (2022) · Journal of Environmental Science and Economics · doi:10.56556/jescae.v1i1.1 · Cited by 30
“…study have found by several scholars on the relation of finance and economic growth which reinforce the findings of the present study such as (Nyasha & Odhiambo, 2015), (Alimi, 2015), (Sahoo, 2014), (Adu, Marbuah, & Mensah, 2013), (R. Levine, 2005), Levine and Zervos (1996) and Hassan et al., 2011.”
ResultThe Finance–Growth Nexus in Asia: A Meta-Analytic Approach
ANWAR, A., & IWASAKI, I. (2023) · Asian Development Review · doi:10.1142/s0116110523500063 · Cited by 7
Metadata
- Authors
- Sahoo, S.
- Affiliations
- Qatar Central Bank (QA)
- Corresponding author
- Sahoo, Satyananda
- Venue
- Margin: The Journal of Applied Economic Research
- Publisher
- SAGE Publications
- Published
- 2014-04-08
- Volume
- 8
- Issue
- 2
- Pages
- 93-114
- ISSN
- 0025-2921 (ISSN-L)
- 0973-8029
- OpenAlex
- W2053494699
- Cited by
- 17
- References
- 0
- Citations by year
- 2026: 3 · 2024: 1 · 2023: 1 · 2022: 3 · 2021: 3 · 2019: 3 · 2018: 2 · 2017: 1
- FWCI
- 1.87
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- Margin The Journal of Applied Economic Research (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
- Social Sciences › Economics, Econometrics and Finance › Finance › Banking stability, regulation, efficiency
- Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Economic Theory and Policy
- Keywords
- financial intermediation, financial deepening, bank-based financial systems, market-based financial systems, economic growth, private sector credit, market capitalization, credit disbursement, India, Granger causality
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