Research On The Transmission Mechanism Of Financial Development To Economic Growth In Gansu Province

At present China is in the key stage of the transformation of economic development mode and deepening the reform of the financial system. An accurate understanding the action and the transmission mechanism that financial development increases to economy is conducive to effectively promote economic growth and structural transformation through the financial system. In addition, China’s regional economic development is very uneven, and there are significant differences between different regions in economic and financial development.Gansu province is one of the less developed western regions, and there is a gap compared with the developed eastern provinces. How to coordinate the regional finance and the sound development of the regional economy, and display the positive effect of finance for patronizing regional economic growth become a theoretical topic worthy of attention and study. Therefore, it is very necessary to study the internal transmission mechanism of financial development which affects economic growth, so that finance can incessantly improve economic development in the long term.Firstly, this paper summarizes the normal intensions about financial development theory in the theoretical study and the financial process in the theory of economic growth through inductive and comparative methods, induction and contrast. Secondly, after expanding the concrete intension and analyzing the models of economic theory, this paper constructs a series of indicators to measure economic growth and financial development. Finally, this thesis goes into the empirical analysis. Through the direct empirical test of the relationship between financial development and economic growth at first, a significant correlation and causal relationship can be found between them. The scale of financial development plays a significant positive role in promoting economic growth.Then the source of economic growth is decomposed into three parts:material capital, human capital and total factor productivity, and the effects of financial development on economic growth through the three canals above will be analysed. Through thorough analyse of above-mentioned contents, appropriate conclusions can be made as follows:Firstly, there is a long-term stable relationship between financial development scale, efficiency and economic growth in Gansu province. The scale of financial development is significantly positively correlated to economic growth and plays a one-way role. This has (?)estified theoretically the Patrick-Hypothesis:At the early stage of economic growth tinancial sector promote economic growth through expanding financial institutions and financial service.Secondly, the impulse of economic growth on financial scale in the short term is positive and significant, which shows that the enlargement of financial scale will accelerate economic growth in Gansu province. The impulse of economic growth on the efficiency of financial intermediation is negative and not significant, which shows that capital marginal output decreases and even is minus (negative), namely the deficiency of investing efficiency has caused an opposite impulse reaction model.Thirdly, the economic growth in Gansu province depends on numerous use of material capital. At the same time, human capital and total factor productivity have the disreplaceable positive effect on the economic growth. Material capital, human capital and total factor productivity have significantly positive effect on the economic growth in Gansu province.Fourthly, financial development plays a significant role in promoting long-term growth through not only the traditional capital accumulation ways but also the total factor productivity growth mechanism for the local economy in Gansu. Financial scale indexes makes significant positive effects of unidirectional Granger on material capital accumulation, human capital and total factor productivity, which means that financial development can steadily promote local economic growth through these channels in the long term.Some potential innovations in this paper are as follows:Firstly, finance is taken into account widely as a major pillar industry and econometric model is constructed to deal with the transmission effect of financial development to economic growth. Most current literatures isolate banking from securities and insurance industries, and deal with enhancement of them for economic growth. They pay more attention to the study of the banking. There is rare literature, which take the three factors into account widely. This paper makes up for this shortcoming, and builds financial development indicators and econometric models through combining these three factors, and analysis the synergistic effects on promoting economic growth.Secondly, in combination with regional characteristics of Gansu province, the VAR-model is constructed to research the correlation and causality between financial development and economic growth. The economic and financial development in different regions in China is unbalanced. Too much macro study will bring about low passing rate of test of model stability. In view of this, different from the previous study on the level of the nation or of the east, middle and west in China, this paper has adopted data from1978to2011in Gansu and established VAR model for empirical analysis of the relationship between financial development and economic growth, which enhance the pertinence and practicability of research.Thirdly, on the basis of measuring of economic growth source, this paper inquiry into internal mechanism of economic growth in Gansu from the perspective of endogenous growth theory. Direct study on the relationship between financial and economic growth can not found the interior structure of transmission mechanism between them. On the basis of measuring of economic growth resources such as material capital deposit, human capital and total factor productivity, this paper designe indicators of financial developmen such as financial contribution rate from the aspect of endogenous growth theory. An indirect method will be brought into study and financial development process will be analysed, which takes effect on multiple mechanism and its internal structure process of economic growth.Fourthly, combined with study conclusions, this paper puts forward suggestions and countermeasures which support economic development and further improve the efficiency of financial. According to the characteristics of the regional empirical analysis results and the environment of economic and financial, this article makes suggestions with higher appropriateness and pertinence to improve allocative efficiency of financial resources and to promote economic growth in Gansu from some aspects below:enlarging financial capital scale, optimizing banking and capital market structure, introducing multifarious financial instruments, furthering innovation of financial institutions and system, etc.