Dynamic Relation Between Banking Sector Development And Economic Growth In Shandong Province

In recent years, Shandong as one of the provinces with fastest economic growth in our country, its GDP keep up double-digit growth for 18 consecutive years. Meanwhile, the banking industry as the main regional financial industry in Shandong Province has made considerable progress, the resource integration degree of banking industry is increasing constantly, the competition of banking industry becomes fiercer. Based on the domestic and foreign theories and empirical researches about relationships between banking sector development and economic growth, this paper using annual data between 1978 and 2008 in Shandong Province as the sample, by empirical analysis and tests including cointegration test, Granger causality test, impulse response and variance decomposition based on VAR model, focused on the relationships between the development of three aspects including structure, size and efficiency in banking industry and regional economic growth in Shandong Province.The result shows that there is a two-way causality between the upsize of Shandong's banking industry and economic growth. But there is a negative correlation between the concentration ratio of banking systems and economic growth in Shandong and the economy grows with the drop of banking centralization. It is a one-way causality between concentration ratio of banking system and economic growth that the economic growth promotes the drop of concentration ratio of banking system in Shandong. However, the drop of concentration ratio of banking systems doesn't result in Shandong's economic growth. Banking financial efficiency of the dynamic impact on economic development is not obvious, it is not the cause of economic development in Shandong.At last, this paper puts forward some suggestions:improving the quality of financial assets, maintain the healthy growth on the size of the banking deposit and loan, adjusting and optimizing the banking structure, making great efforts to develop small and medium sized banks, and promote economic structural reforms and encourage private economic development.