FINANCIAL DEVELOPMENT, ECONOMIC-GROWTH AND BANKING SECTOR CONTROLS - EVIDENCE FROM INDIA

This paper uses newly collected data from the Reserve Bank of India to examine the effects of various types of banking sector controls on th e process of financial deepening. with the exception of a lending rare ceiling, these controls are found to influence financial deepening ne gatively, independently of the well known effect of the real interest rate. Exogeneity tests suggest that financial deepening and economic g rowth are jointly determined. Thus, policies which affect financial de epening may also have an influence on economic growth.