The Determinants of Long Run Finance Development: The ARDL Bound Testing Approach.

The paper investigates the determinants of long run finance development in India over the period of April 1994 to April 2011. The investigation is carried out by unit root, cointegration, ARDL bound test approach and VECM. The ARDL finds the existence of long run equilibrium relationship between finance development and economic growth. The VECM confirms the existence of bidirectional causality between finance development and economic growth. It also confirms the existence of unidirectional causality from stock market development to economic growth and from finance development to inflation. The paper at the end suggests that financial development should be considered as the policy variable to enhance economic growth in the Indian economy, especially during the globalization era of 1990s. [ABSTRACT FROM AUTHOR]