| At present, China is facing with the problem of financial openness which is accompanied with economic globalization. It is an issue deserving further investigation about the relationship between financial openness and economic development and preparations which a country can make to rise the challenge of financial openness better.In the paper, we use cross-section and panel data to analyze to role of financial openness in the development of economic growth. The result tells us that a higher level of financial openness does promote the growth of economy, but the relationship between the two is neither linear nor monotonous. Through the research on the cross-term of financial openness and threshold conditions, we draw the conclusion that higher levels of income, trade openness and the development of stock market can play an important and positive role in the relationship between financial openness and economic growth.In the panel data analysis, at first we utilize the Granger causality test and gain the result that financial openness is the Granger cause of economic growth, however economic growth is not the Granger cause of financial openness. Then by threshold model, we find that the level of income, bank credit, the consumption of government and the trade openness are significant double thresholds. As well, institution, the development of stock market and inflation are double thresholds, but they are not enough significant. Foreign exchange reserve is a triple threshold.Based on the conclusion we get, China should enhance the institution, promote the development of stock market and increase the level of trade openness which can contribute the further development of economy of China. |
