Financial Development And Economic Growth

Economic growth is very important to social development and improving people’s living standard. Because it is important, exploring reasons for economic growth is always the focus of theoretical attention. The researches hold the view that accumulation of factors of production, enhancement of resources allocation efficiency, technology progress, system development, culture inheritance and innovation are the driving forces of economic growth. With the development of financial theory, economists pay more attention to the contribution of financial development to economic growth. Some models have been established to explain how financial development influence economic growth. In addition, a large number of empirical studies support that moderate financial development is a promotion to economic growth, otherwise, it will be negative to economic growth.At present, there are lots of researches based on Shandong province, but no consistent conclusion exists. They failed to reflect the actual situation of Shandong province because of defaults in index selection, model setting and other defects. Based on previous researches, this paper uses historical data between year1978and year2009, establishes index system to measure economic growth and financial development of Shandong Province, and statistical and econometric analysis are used.First, statistical research describes the situation of Shandong province from aspects of rate of economic growth, investment ratio in fixed assets, growth rate of financial industry output, value and structure of financial assets and Securitization ratio.Also, the existing problems are analyzed.Then, empirical analysis carry on by introducing the following index:scale of financial intermediation, financial structure and efficiency of financial intermediary. Cointegration test and Granger causality test show:there is a long-term cointegration relationship between financial development and economic growth, but the financial development is not the main factor that affects economic growth, it is only responsed to economic growth passively before1993.But, with the development of security market, financial development becomes a significant cause of economic growth.