Study On The Correlation Between Financial Development And Economic Growth In Liaoning Province

Since the reform and opening up in1978, the economy has maintained rapid growth.Gross Domestic Product (GDP) of China increased from364.5billion yuan in1978to47.1564trillion yuan in2011. GDP of China has increased by almost130times only in33years. With the rapid growth of economy, financial industry has been profounddevelopment and gradually infiltrates the real economy in China. Finance has also playeda certain promoting effect on economic growth in China. Therefore, finance hasgradually become the important macro-control means and is also important means whichfinancial resources are allocated. At the same time, economic growth also promotesfinancial development to a certain degree. Therefore, financial development andeconomic growth are supplement, influence and interaction each other.Nowadays, with the rapid economic growth and financial development of China,economic and financial has got rapid development in Liaoning province which is one ofthe northeast old industrial base since reform and opening up. GDP of Liaoning provinceincreased from22.92billion yuan in1978to2.22267trillion yuan in2011. The economylevel of Liaoning province has consistently ranked first place in the northeast threeprovinces. At the same time, the financial industry has been also rapid development inLiaoning province. It gradually infiltrates the various parts of the economy, and it isindivisible with economy. The role of finance is also gradually increasing in economy.Therefore, to establish the whole function of the financial system to adapt to theeconomic growth and to ensure that financial development and economic growth arecompatible have a vital role in the sustainable growth of economy. Although economyand finance got rapid development in Liaoning province, compared to the southeast ofChina, its development speed is still relatively backward. Therefore, this paper studiesthe correlation between financial development and economic growth in Liaoningprovince, and then puts forward some feasible policy suggestions on economic growthfor Liaoning province from the perspective of finance. It makes financial developmentallows full play to the role in promoting economic growth in Liaoning province. At theend, it makes financial development and economic growth form a virtuous cycle. In this paper, the corresponding indexes have been selected, the appropriate indexsystem has been established and every city’s annual panel data (1996-2011) in Liaoningprovince has been selected. The econometric model is used, and then the correlationbetween financial development and economic growth has carried on the empiricalresearch in Liaoning province. The empirical results show that the balance of depositsfrom financial institutions (D) and the efficiency of financial intermediation (F) havepromoted economic growth in Liaoning province, but the balance of loan from financialinstitutions (L) has inhibited economic growth in Liaoning province. This shows thatfinancial development has played a certain positive role on economic growth in Liaoningprovince. However, it doesn’t have completely effective in promoting economic growthin Liaoning province. This also shows that there is certain non-adaptive betweenfinancial development and economic growth in Liaoning province. Therefore, facing theproblems in financial development and economic growth in Liaoning province, somepolicy suggestions are put forward in this paper. It hopes that some valuable referencecan be provided for financial development and economic growth, and virtuous cyclebetween financial development and economic growth can be formed in Liaoningprovince. Finally, the sustainable development of financial and steady economic growthcan be realized in Liaoning province.