Technological development, financial development, and economic growth in India: Is there a non-linear and asymmetric relationship?

Abstract

Purpose

The main purpose of the present research is to analyze the relationship between technological development, financial development and economic growth in India in a non-linear and asymmetric framework.

Design/methodology/approach

The study employs the nonlinear autoregressive distributed lags model (NARDL) and Hetemi J asymmetric causality tests to explore nonlinearities in the dynamic interaction among the variables. The stationarity properties of data are checked by using Ng–Perron and ADF structural break unit root tests. The unit root test confirms that the variables are non-stationarity in level and are differenced stationary.

Findings

The study finds that there is a cointegrating relationship between technological development, financial development and economic growth in the long run. The findings suggest that a positive shock in technological development increases economic growth (coefficient value 1.497 at 1% significance level) and a negative shock will harm economic performance (coefficient value −0.519 at 1% significance level). A long-term positives shock in financial development boosts the economy (coefficient value 1.08 at 5% significance level) and negative shock hampers the economic performance (coefficient value −1.09 at 5% significance level). The asymmetric causality test result confirms bi-directional causality between technological development and economic growth and unidirectional causality from negative economic growth to negative technological development and bi-directional causality between economic growth and financial development, unidirectional negative financial development to economic growth.

Research limitations/implications

The results of this research can significantly facilitate stakeholders and policymakers in devising short-term as well as long-term policies for financial development and technological innovation to achieve sustainable long-run economic growth in India.

Originality/value

This paper is the first of its kind to empirically examine the cointegrating and causal relationship between technology, financial development and economic growth in India using non-linear asymmetric cointegration and causality tests.

Citation

Giri, A.K., Mohapatra, G. and Debata, B. (2023), "Technological development, financial development, and economic growth in India: Is there a non-linear and asymmetric relationship?", Journal of Economic and Administrative Sciences, Vol. 39 No. 1, pp. 117-133. https://doi.org/10.1108/JEAS-03-2021-0060