The global financial crisis of 2008 emphasized the need for monetary policy authorities to have a more comprehensive view of the conditions prevailing in the economy before deciding their policy stance. The purpose of this paper is to outline the construction of a financial conditions index (FCI) and investigate the possible co-integrating relationship between the economic growth and FCI.,The study employs the PCA methodology, with appropriate augmentations to handle the unbalanced panel data-sets and constructs a FCI for India. It tests the growth-predicting power of FCI by applying the auto regressive distributed lags approach to co-integration and verifies if the FCI is co-integrated with real GDP growth. It also discusses construction of a financial development index (FDI) which tracks the financial markets through M3, market capitalization and credit amount to residents.,The constructed FCI has a quarterly frequency and is available starting 1998q2. The long-run coefficient of FCI while predicting the real GDP growth is significant at 10 percent. The results confirm that a more-broader index FCI outperforms a narrower index FDI in growth prediction.,By showing that FCI is a better growth predictor than FDI, the study establishes the importance of including the foreign exchange markets, bond markets and stock markets while summarizing the conditions in the economy. The authors hope that the FCI would be helpful to the monetary authorities in their policy decisions.,The paper adds to the few existing studies studies dealing with FCI for Indian economy and constructs a more comprehensive index which tracks multiple markets simultaneously. It also fills the gap in literature by evaluating the correlating relationship between FCI and economic growth.

中文翻译：

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为印度建立金融增长联系：金融状况指数 (FCI) 方法

2008 年的全球金融危机强调了货币政策当局在决定其政策立场之前需要更全面地了解经济状况。本文的目的是概述金融状况指数（FCI）的构建，并研究经济增长与 FCI 之间可能的协整关系。本研究采用 PCA 方法，并适当增加处理不平衡面板数据- 为印度设置和构建 FCI。它通过将自回归分布式滞后方法应用于协整来检验 FCI 的增长预测能力，并验证 FCI 是否与实际 GDP 增长协整。它还讨论了通过 M3 跟踪金融市场的金融发展指数 (FDI) 的构建，居民的市值和信贷额。,构建的 FCI 有一个季度频率，从 1998q2 开始可用。FCI 在预测实际 GDP 增长时的长期系数显着为 10%。结果证实，更广泛的指数 FCI 在增长预测方面优于更窄的指数 FDI。,通过表明 FCI 是比 FDI 更好的增长预测指标，该研究确立了将外汇市场、债券市场和股票市场包括在内的重要性，同时总结经济状况。作者希望 FCI 对货币当局的政策决策有所帮助。,本文补充了现有的少数印度经济 FCI 研究，并构建了一个更全面的指数，同时跟踪多个市场。