Research On The Relationship Between Rural Financial Development And Rural Economic Growth In Guangdong

Guangdong province has maintained a rapid growth on economics since theimplementation of reform and opening up policy, whether on the total economic output orgrowth rate. But there are still some grim questions that we haven’t solved in the process ofGuangdong’s economic development and urbanization. The "three rural" issue is increasinglyserious with the income growth of rural residents slow down while the total economic growsfast. The key to solve the problems above is rural financial development as is the mostimportant basic configuration elements of rural economic development.In theoretical part, some related theories and existing literature about financial developmentand economic growth and the interaction mechanism of the two are firstly summarized. Then theauthor reviewed the course of rural finance development in Guangdong province, point out thecurrent situation and existing problems in the financial development and economic growth ofGuangdong province. After that, we designed rural economic growth and rural financialdevelopment indicators which based on the basic theory about rural economic growth and ruralfinancial development. Through the analysis of the rural financial develop index and the ruraleconomic growth index in the model of ADF unit root test, cointegration test, VEC model andGranger-causality test, we know that there is a long-term equilibrium relationship between therural financial development and economic growth in rural Guangdong province. Rural financialdevelopment can contribute to rural economic growth while the short-term dynamic effect ofrural economic growth on rural financial development is not significant. Rural financialdevelopment lags behind rural economic growth and the interaction mechanism between the twohaven’t been established.Therefore, some policy recommendations have been put forward so as to help with ruralfinancial deepening and promote further development. To improve the rural financial system, onone hand, we must pay more attention to the role which financial services in rural areas andsmall and medium-sized rural financial institutions played. On the other hand, we need to establish a wide range of credit models and improve the ri sk comp ensation mechan ism in ruralareas.