ItemArticle

Analyzing the synchronization and causality between Indias financial and business cycle: empirical evidence and policy insights

Title
Analyzing the synchronization and causality between Indias financial and business cycle: empirical evidence and policy insights
Creator
Paul, Vinuth; Rajan, Sruthi; K.S., Sujit; Purswani, Geetanjali; Kumara R, Naveen
Description
Purpose This research aims to develop an aggregate financial cycle for India and understand its interrelationship with the business cycle. To study this relationship, the research focuses on examining the level of synchronization, comovement and leadlag relationship between the aggregate financial cycle and the business cycle of India. Design/methodology/approach The study uses principal component analysis and wavelet transform analysis to develop the aggregate financial cycle and understand its time-frequency characteristics, respectively. Then the study undertakes a three-step econometric analysis to measure the various aspects of the relationship between the financial and business cycles. Findings The study found that the aggregate financial cycle and the Indian business cycle have long-term equilibrating relationships. The comovement and the degree of synchronization between the two cycles are moderate, which shows that the relationship between them is relatively dynamic. Further, the leadlag relationship indicated that the financial cycle often leads the business cycle and not vice versa. Originality/value The research stands out as one of the few works to capture multiple dimensions of the financial market into a single aggregate financial cycle to present a broader picture of an emerging market setting, such as India. This study adds to the literature by systematically investigating the relationship between financial and business cycles over the short-, medium- and long-term horizons. Emerald Publishing Limited
Source
International Journal of Emerging Markets;pp.1-16
Date
01-01-2026
Publisher
Emerald Publishing
Subject
Aggregate financial cycle; Business cycle; Causality; Comovement; Concordance index; Emerging country; Financial interlinkage; Financial market; Financial stability; G0; G1; G4; Indian financial cycle; Lead-lag relationship; Synchronization
Coverage
Paul V., Christ University, Bengaluru, India; Rajan S., Christ University, Bengaluru, India; K.S. S., Christ University, Bengaluru, India; Purswani G., Christ University, Bengaluru, India; Kumara R N., Christ University, Bengaluru, India
Rights
Restricted Access; Hardcopy may be available in the library
Relation
ISSN: 17468809;
Format
online
Language
English
Type
Article

Citation

Paul, Vinuth; Rajan, Sruthi; K.S., Sujit; Purswani, Geetanjali; Kumara R, Naveen, “Analyzing the synchronization and causality between Indias financial and business cycle: empirical evidence and policy insights,” CHRIST (Deemed To Be University) Institutional Repository, accessed June 17, 2026, https://archives.christuniversity.in/items/show/22876.

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