Empirical Research On The Relationship Between Financial Development And Economic Growth

Finance is the core of the modern economic society. The relation between the development of finance and increase of economy is given more and more attention. Existing extensive literature studies show that financial development is an important factor in economic growth. At the key period of reformation on financial system and the optimization of economic structure, whether the relation between China's financial development and economic increase is compliable? If yes, what is the relation? And how the relation works? This thesis will give the elementary answers for above questions by analysis of relation between China financial development and economic increase.This thesis constructs proper variables of financial development and economic growth, and researches mainly the relationships of economic growth with financial deepen extent, development structure and development efficiency respectively. This analysis technique constructs VAR model and firstly makes long-term and short-term Granger causal analysis on variables of financial development and economic increase. Then make cointegrated relationship test, and estimate the parameters of variables based on the model of vector error, finally progress dynamic effect analysis with pulse response function and standard mean square error decomposition. The conclusions are arrived as follows: (1) there exists mutual Granger causality between financial deepen extent and economic growth at short period, which is very weak seen from long period. There is a positive mutual impact effect between financial deepen extent and economic growth analyzed from dynamic view, but the effect diminishes gradually and becomes stable at the end. The contribution rate of financial deepen extent to economic growth reaches 15.48% at the most, which demands that the government accelerates financial deepen reform from not only the financial development scale, but the quality of financial development scale to promote economic growth. (2) Granger causality hardly exists between financial development structure and economic growth at short period , which is very weak at long period. Analysis from dynamic view shows that financial structure variable plays a negative impact role in economic growth firstly, which will convert a positive impact effect after 4 years' delay. Financial structure variable contributes little to economic growth viewed from the contribution only reach 8.814% at the most, which shows that the bond and stock market play a small part in our country's economic growth. We should develop the bond and stock market and make the market standardization to avoid financial risk lest restrict economic growth. (3) Financial development efficiency variable mainly denote the efficiency of finance agency providing loans to non-national economy. Researches demonstrates that the Granger causality of financial development efficiency to economic growth is very weak, whereas it is apparent on the contrary. There is a positive impact effect of financial development efficiency to economic growth analyzed from dynamic view, and the effect last a long time. At preceding several periods, financial development efficiency variable contributes to economic growth less than financial deepen extent at first several periods, but more than financial deepen extent 10 periods later. The result shows non-national economic growth promote the entire economic growth, which demands the improvement of financial development efficiency. However, the policy exists "the owner' discrimination" to non-national possession factories that makes restrictions to put loans to them, which block economic growth greatly. Therefore, we should found and establish a non-national economy's financing system and eliminate "the owner' discrimination".Corresponding suggestions are given at the last portion of this thesis. Firstly, farther reformation is necessary and the qualitative enhancement of financial development should be given more attentions at the time of extending financial development scale. Secondly, capital market development should be quicken and the efficiency of the financial system should be heighten .Thirdly, financial system should be further reformed and private economy financial environment should be improved.Corresponding suggestions are given at the last portion of this thesis. Firstly, farther reformation is necessary and the qualitative enhancement of financial development should be given more attentions at the time of extending financial development scale. Secondly, capital market development should be quicken and the efficiency of the financial system should be heighten .Thirdly, financial system should be further reformed and private economy financial environment should be improved.The index of this thesis differs from other's. Financial deepen extent is expressed in financial interrelated ratio, Financial developing efficiency is expressed in the ratio of private economy loan to GDP. Then innovations are made in measure method , dynamic analysis is embodied though long-term and short-term analysis of VAR model. Else ,the whole analytic process is run though different aspects of finance ,so the result isn't partial.