Empirical Analysis On Relationship Between Regional Financial Disparities And Economic Growth

There is an obviously difference of financial development between urban and rural areas since the reform and opening-up of China. With the financial activities concentrating in the developed regions and the key cities, it shows a lower quantity, small amount as well as the lagged form in the undeveloped regions. As the function of finance penetrating the whole society, people start to look into the relationship between the regional financial development and the economic growth and try to explore the internal mechanism.Beginning with the study of relationship between regional financial development and the economic growth, this paper improves the old theory model by using new data to run the empirical test. After measuring the difference in the regional financial development using the data from 2002 to 2006, this paper runs the adjustable regression model to test the disparities of regional finance. Later comes the granger-causality test and the financial development level based on labor division in which the financial industry boosts the whole economic.According to the results of index measurement and regression model analysis, we can see the obviously differences in both quantity and formation among regions—the eastern part is way more advanced than the other areas, while western, central as well as northeastern are far away behind and state-owned bank credit plays an important role in the financial development in those region. Granger-causality test proofs the importance of financial intermediary agents since the extension in the loan greatly support the capital formation. But there also exists a regional difference in the productivity of the financial development. The last test of the financial development model based on labor division also confirms that labor division is one of the internal powers pushing the whole economic growth.