RELATIONSHIP BETWEEN PRIVATE EQUITY, INFLATION AND ECONOMIC GROWTH

The aim of the study is to find interrelationships between Private Equity, financial stability and economic growth of India for the period 1996-2014.  Johansen Co-integration Test followed by Vector-Error Correction Model and Granger Causality has been used to investigate it. Johansen Co-integration test finds out a long run as well as the short run relationship between Private Equity, Inflation and Economic Growth. After proving co-integration a bi-directional relationship has been found out between Private Equity and Economic Growth. Also, short run causality has been found out between private equity and economic growth and economic growth and inflation. Originality: This study is significant as there are many studies which have found out the relationship between foreign direct investment and economic growth, but this study is first of its kind to find interrelationship between private equity, economic growth and stability for India. The models have been tested using VECM and Granger Causality revealing that private equity has a positive significance on the macro-economic factors. Keywords : Private Equity, Economic Growth, Johansen Co-integration, Granger Causality, Vector-Error Correction Model. JEL Classification : O5