Relationship between Financial Development and Economic Growth: An Empirical Evidence from BRICS Economies
This study explores the causal relationship between financial development and economic growth of BRICS economies by taking the annual data from 1996 to 2016. Many of the existing studies considered only the depth factor for measuring financial development. In addition to depth this study considers efficiency and stability factors for measuring financial development. Also, most of the studies used either financial institution or financial market as a proxy for financial development which may not fully reflect the financial development. Hence, to measure the financial system development, the study constructs three broad-based indices—the financial institution development index, financial market development index, and financial system development index (which combines intuitions and markets) by using the principal component analysis (PCA). It starts with empirical testing of the stylized features such as efficiency, volatility, mean reversion and Value at Risk of these five stock markets. We have taken daily data from 27 September 1997 to 31 March 2018.