Financial Development, Fdi Technology Spillover Effect And Economic Growth

As an important form of the international capital flow, FDI has had a significantinfluence on the development of world economy. The influence of FDI on economic growth ismainly through capital accumulation effect and technology spillover effect of two ways. Onthe premise of abundant capital of Shanxi Province, this paper based on the endogenouseconomic growth theory focuses on the impact of FDI technology spillover effect oneconomic growth. But the effect of FDI technology spillover effect on economic growth isrestricted by the absorptive capacity. As one of the important factors influencing theabsorptive capacity of FDI technology spillover effect and as a new research perspective,financial development has getted the attention of scholars at home and abroad over the pastdecade.At present, existing related research was mostly from the perspective of the whole nation,economic developed regions or provinces and the region of low efficiency for the economydevelopment is less involved. In addition, most of financial development index was selectedfrom financial development scale level or financial development efficiency level, whose datawas often confused with each other. And many scholars selected a index to analyze dataresulting in one-sidedness. To complement and avoid the above problems, this papercombined with the actual situation of financial development in Shanxi Province selects themulti-level index from view of financial scale level, financial structure level and financialefficiency level, and used principal component analysis (PCA) to acquire composite scores offinancial development. Through the empirical analysis, this paper researches the role of theoverall financial development level in FDI spillover promoting economic growth in ShanxiProvince, whether the FDI technology spillover effect is existing or not and what kind of impact is producted by FDI technology spillover on economic growth. Besides, measure thethreshold value of financial development.At first, this paper builds the theoretical relationship of financial development, FDItechnology spillover effect and economic growth. It explores the relationship from the aspectof theory model and mechanism of action between FDI technology spillover effect decided byfinancial development and economic growth. At last, respectively come to the conclusion:financial development is the important factor of influencing the FDI spillover effect; influencemechanism is that financial development affects the FDI technology spillover effect and inturn affects economic growth by the two ways of “providing financial support and promotingthe technical implementation” and “improving the efficiency of investment and reducing therisk of investment”.On the basis of the theory and the data of Shanxi Province, this paper carries on theempirical analysis and the empirical research is divided into two steps. The first step is theempirical test of time series data. Through co-integration test and granger causality test, thispaper confirms that the overall financial development level in Shanxi Province is an importantfactor in FDI spillover effect and economic growth. The second step is empirical test of paneldata and reason analysis. By comparative analysis of regression results of considering crossterm and not considering the cross term, it is concluded that FDI technology spillover effectaffected by the overall financial development level exists and has a significantly negativeimpact on economic growth; the critical value of financial development is7.500. Aiming atthe result of FDI technology spillover significantly negative of ShanXi province, causeanalysis is to explore the possible problems from the angle of FDI and the angle of financialdevelopment.Finally based on the reasons, the corresponding countermeasures and suggestions followon: to improve the investment environment in Shanxi province and expand the scale of FDIintroduction; to broaden the channel of foreign capital inflow and improve the quality of FDIutilization; to develop various financial markets and optimize the financing structure; toaccelerate reform of the financial system and improve the financial efficiency.