The Empirical Study Of Relationship Between The Finance Development And Economic Growth

During the past 60 years, the economic and financial development of China has attracted world wide attention. In the key era of financial system reforming and economical structure adjusting, is there some connection between the financial development and economic increase? What is the effect of financial development on economic increase in China? In this paper, the author tries to investigate the relationship between financial development and economic increase of China on the point view of demonstration analysis and make a preliminary response to the questions proposed above.First, the author made a review on the research of connection between financial development and economic increase about traditional financial theory, and looked back the there periods of financial development since the foundation of China. Secondly, the author founded the measurable variables of financial development and economic growth and analyses briefly all data of relationship between financial development and economic growth on four aspects with Grainger causality analysis method. Thirdly, the author set up the empirical VAR model to capture the dynamic relationship between financial development and economic growth which datas covers the period 1952-2006.Traditional financial development theories can not explain the effect of Chinese finance to economic increase; the essential of Chinese finance is for country-held corporation controlled by government; traditional financial development theories can not explain the specialty of Chinese finance; the specialty of Chinese finance decided the particular mechanism of Chinese finance to economic increase.In the end, based on the demonstration analysis and specialty of Chinese finance, the author made these propositions: financial reform must be assorted with and lag the reform of country-held corporation; the reform of interest rate should lag behind the reform of commercialization of financial institution; Chinese financial reform shouldpropose in proper sequence. More haste, less speed.