An Empirical Study Of The Relationship Between Financial Development And Economic Growth In Shandong Province

As to achieve rapid and stable economic growth is one of the goals of modern society pursuit, so how to promote the economic growth has been the core issue of economic research. As the financial industry has become the core of China’s national economy, large attention has been focused on the correlation of financial development and economic growth. Shandong Province, as a major economic province of China, the correlation of its financial development and economic growth deserves our in-depth analysis and discussion.Based on the time series data of Shandong Province from 1993 to 2014, we successively use the methods of Factor Analysis, Linear Cointegration, ECM model and combined with the unit root test, Granger test, to overall analyze the correlation and causm three aspects, financial development scale, financial development efficiency, financial development structure; and analyze the state of the economic growth from two aspects,per capita GDP and the growth rate of per capita GDP. Sality of the financial development and the economic growth of Shandong Province.Firstly, we analyze the current situation of the financial development of Shandong Province froecondly, the article constructs a comprehensive evaluation index system of financial development, containing eight variables, concerning four aspects such as the basic indexes, banking development, securities development, insurance development and then uses the method of Factor Analysis to comprehensively evaluate the overall finance development of Shandong Province.Thirdly, test the correlation and causality relationship between the financial development and the economic growth of Shandong province. We find that there is a presence of positively long-term equilibrium between them through linear cointegration empirical analysis and portraye the short-term adjustment mechanism between them through the Linear Error Correction model, and find that in Shandong Province the overall level of financial development has one-way causal relationship to economic growth through Granger causality test and building^ analyzing the Linear Error Correction model. Fourthly, the article finds that there is a high correlation between each one of banking development, securities development, insurance development and economic growth, and there is a presence of two-way causal relationship between each of securities development, insurance development and economic growth, and that banking development is the one-way Granger cause of economic growth, yet basic indexes and economic growth have no Granger causation,with low correlation. Finally, analyze the empirical results obtained previously, and on the basis of the empirical correlation between the financial development and economic growth raise some suggestion to promote the healthy development of the financial so as to promote the economic growth of Shandong Province.