The Study On China's Financial Development And Economic Growth: Based On The Simultaneous-equation Econometric Model

Financial-oriented economic development of countries has become an inexorable trend. Financial development plays an increasingly role in the national economy and is considered as one of vital factors affects economic growth, is becoming increasingly important in the national economy. In recent years, affected by a number of factors at home and abroad, China's international trade advantage on the market is gradually weakening, while slow growth and structural dislocation are found in terms of consumer demand and investment demand, the other two "reinforcements" appeared weak and structural dislocation .Therefore, how to explore the potential for further economic growth by means of financial development has become an important issue in our country.The thesis consists of five chapters; the first chapter introduces research background, research significance, as well as the innovations of this thesis. The second chapter conducts the literature review of the financial development and economic growth and illustrates the domestic and foreign literature in time sequence. The chapter three constitutes the theoretical part of financial development and economic growth. First, we analyze the main function of the financial system, and study the relationship between financial structure and economic growth, concluding that sound and balanced development of the financial structure is very important to economic growth. Combining the classical economic growth model, we analyze how the financial system affects economic growth. and mainly review the financial mechanism of Harrod - Domar Growth Model, Neoclassical Growth Model, the New Model of Economic Growth in the financial process. Chapter IV carries out the empirical research on the financial development and economic growth over the last decade and briefly reviews China's financial development of the last decade. Chapter V, combing the study results with actual situation, we put forward the corresponding suggestions for policies in light of China's banking and stock market.We employs Simultaneous-Equation Model, using Two-Stage Least Squares method and the Generalized Method of Moments estimation, after controlling variables namely investment and imports and exports, which have a impact on the economic growth, do an empirical research of the relationship between China's financial development and economic growth. The results showed that: despite the growing scale of financial intermediation, the efficiency is relatively low, which indicates the banking sector fails to offer the high savings rate to the most productive sector though they make great contribution to the rapid creation of money, it reflecting China's banking sector in the fact that the misallocation of credit funds. The development of the stock market exerts a positive on economic growth. No matter it is the expansion of the scale, or the improvement of mobility. So stock market is indeed conducive to economic growth.