Research On The Relationship Between Financial Development And Economic Growth In Lao. PDR

The relationship between finance and economic growth has always been a theoretical and empirical analysis of the hot issues. Finance as one of the important factors affecting economic growth, and its importance for the majority of scholars has long recognized. Especially Western scholars in recent years, research on the relationship between finance and economic growth is no longer confined to developed countries the wider extended to developing countries. After constant practice test, the theory showing the economies of developing countries, the financial building has a very important role in guiding. Therefore, the combination of the West has become more sophisticated, perfect theory and the actual situation in Laos, Lao economic construction an urgent need to examine the relationship between the Lao financial development and economic growth, as well as the Lao financial system development, financial structure adjustment theoretical basis. Based on this, select the subject of the impact of financial development on economic growth, and to explore and study this issue from the perspective of finance system has important theoretical and practical significance.First,the definition of financial development and economic growth are defined and elaborate financial development and economic growth in the relationship between domestic and foreign research sumary, clear view, pointed out deficiencies; affect the savings rate and payment system, financial development, improve the efficiency of capital allocation, resulting in a higher proportion of savings into investment four analyed how to act on economic growth, while economic growth analysis of how to act on financial de velopment, and how the financial development and economic growth in ter actions have been decribed.Secondly, based on the conduction path and the theoretical analysis of the role of financial development on economic growth framework, many studies theoretical literature emphasized the relationship between financial development and economic growth, this chapter will first introduce the classical theory of economic growth, followed by the modern theory of economic growth,the main theoretical results in the theory of financial development, financial structure theory introduced in the theory of financial development, financial repression theory, the main theoretical results of the financial function. However analysis of the mechanism of action of financial development and economic growth, and to explore the financial elements affecting economic growth, combing and financial development and economic growth in the relationship between macroeconomic theory to provide a theoretical basis for further in-depth research for this article.Third, from three angles overview of the development of financial institutions, credit, stock market development overview and insurance market development general described the evolution of the financial development in Laos, also describes the evolution of the Lao economic growth and financial development and economic growthrelationship to make a basic judgment, which has been the basic conclusion of the relationship of financial development and economic growth in Laos.Fourth, the indicators in the study design and empirical methods. First, classify and analyze the impact of the financial elements of the economic growth, the Second reflect the elements of the index system was constructed on this basis; defined indicators of financial development and economic growth data again; Finally, the degree of financial development on economic growth assumptions and model, which for the next two chapters of empirical research to lay the foundation of the empirical method for selection, financial development and economic growth relationship.Fifth, the empirical research part of this study the role of the country’s financial development on economic growth, the scale of financial development, financial development structure, the efficiency of financial intermediation, foreign trade and the effective interest rate is selected, the relevant variables unit root test, cointegration analysis,Construction of the vector error correction model, the use of multiple linear regression was used to study the various financial variables affect the intensity and direction of action for economic growth.Sixth, the role of financial development on economic growth in the study area, select the scale of financial development, financial development structure, the efficiency of financial intermediation, employment growth and the proportion of the total investment, the relevant variables in the panel data model unit roottest, cointegration analysis and Granger causality test.This paper examines the sample reflects the long-term stable relationship of view, there are long-term and stable relationship between the size of the Lao financial development, financial development, structure, financial development intermediary efficiency and economic growth following conclusion we can come to a level of national and regional:(1) from the point of view of the Laos national financial development and economic growth in the history and current status, since the reform and opening-up, along with the rapid development of the economy, the level of development of the financial sector as a whole, Laos has also been improved and enhanced, in particular, the development of the financial scale and financial structuremaintain good synchronization forward to expand and improve the development and economic growth. The existence of this phenomenon is also our financial development and economic growth are mutually influential study in one of the premises.(2) from the Laos financial scale, long-term point of view, since the reform and opening up, the Lao total financial assets continue to expand and its expansion to play its due role in promoting economic growth. In fact, a variety of financial assets, the greater the proportion in the national economy that they are becoming more and more important in the national economy, but that does not mean that the quality of a country’s financial development reached the appropriate level. If the expansion of financial assets on the basis of high-quality, high-efficiency, this expansion is of course the economic growth play a facilitating role, otherwise, this expansion implies a great danger.(3) From the point of view of the Laos national financial structural changes in recent years, the Central Bank of Laos accounted for the proportion of the total loans of the banking sector showing a declining trend, reflecting the optimization of the financial structure between the banking industry began moresequence competition, no doubt, will be beneficial to the role of financial positive effect on the economy. But we also found that after2005, to some extent reflects the efficiency of financial intermediation bank share of non-state-owned banks lending to non-state-owned enterprises accounted for the proportion of the total loans of the banking sector has declined characteristics, these marked changes to the bank ownership discrimination "phenomenon is still widespread in the loan process, which undoubtedly is not conducive to the development of SMEs Laos and expand.(4) from the point of view of the Lao efficiency of financial intermediation, Lao efficiency of financial intermediation has long been constantly upgrading and improving the Lao financial system is still based on the bank-dominated financial system, banks play the most important role in the financial system as a wholeis Laos’s most important financial intermediaries. The improvement of the efficiency of financial intermediation, the performance of the more savings deposits to go into the real economy, but due to the presence of deposit creation mechanism, the efficiency of financial intermediation not promote economic growth because of the leading financial market in the state-owned commercial banks accounted for, efficiency issues and did not get enough attention and improve the existing market and financial market the lack of multi-level, a variety of products and services, it is difficult to meet the demand, and can not promote economic growth. Further analysis can be found, the loan-to-deposit ratio of the Lao financial system has been declining in the1987-2008period, and then gradually increased. This is mainly due to the ability of financial institutions and credit constraints. The one hand, the state-owned commercial banks and joint-stock commercial banks in accordance with the principle of effective most of both to the security, the implementation of a corporate management system, there are a lot of money. On the other hand, the Lao lot of credit guarantee institutions for the development of small scale and weak guarantee a very limited role in the mitigation of SME financing. Therefore, the role of economic growth to improve the financial efficiency is not obvious.(5) from the point of view of the empirical analysis of the statistical description of various regions of Laos and panel data, Laos four regional financial development and economic growth level there are very different economic and financial developed are concentrated in central Laos capital, Vientiane, Laosover the interval there is a big difference and imbalance. Investigation of the efficiency of financial structure size and financial intermediaries, consistent performance trend of the four large regional financial deposits, financial loans. Absolute scale, the capital city of Vientiane and central in the dominant, but the southern and northern regions, the growth rate in recent years, there are significant catch-up trend, and even the speed of some indicators even went to the capital, Vientiane, and Central almost. Use efficiency in financial assets, the central region of the highest in four regions in Vientiane, the capital region, followed by the southern and northern part of the lowest, shows that the correlation of the scale of the efficient use of financial assets and financial structure of the various regions, and related to the region’s economic development situation is also very strong.Finally, the paper summarizes the entire research and feasible policy recommendations for the above analysis, and the inadequacies of this study.