Analysis On The Relationship Between Financial Industry Agglomeration And Economic Growth Of Shanghai

With the rapid development of economy, the financial industry is playing a more and more important role in the whole economic system. Because of their own high liquidity, financial resources and financial activities become more and more concentrated in some important financial centers. Researches have shown that the financial industry agglomeration has a positive effect on economic growth. Because Shanghai is one of the cities with the most concentrated financial resources, the study chooses Shanghai as the sample to make an empirical research on the relationship between its financial industry agglomeration and the economic growth in order to lay a solid theoretical foundation and provide valuable suggestions with regard to promoting financial industrial agglomeration, economic growth and the construction of international financial center in Shanghai better.This study is based on a review of several classic modern theories about industrial agglomeration, combined with knowledge of financial geography, and uses research methods of theoretical and empirical analysis, qualitative and quantitative analysis. The study analyzes the formation of financial industry agglomeration, combs the mechanism of promoting economic growth of financial industry agglomeration. Regarding the formation of financial industrial agglomeration, the paper argues that there are several factors working together, namely, development of entity economy, the high liquidity of finance, the growth of financial industry itself, the externalities of agglomeration and financial economies of scale. Regarding the path by which financial industrial agglomeration promotes economic growth, this paper makes an analysis from the macro level and micro level respectively.When conducting empirical research, this paper describes the status of Shanghai’s economic development and financial industry respectively. And then, quantifies the degree of financial industry agglomeration in Shanghai from 1996 to 2013, using the index of Location Quotient and Agglomeration Scale. Then, the study proves that the financial industry agglomeration in Shanghai has a single effect on promoting economic growth after a series of tests, such as cooperative test, unit root test, cointegration test, VAR model and granger causality test. Moreover, the study quantifies the effect of financial industry agglomeration on economic growth through material capital input, labor capital input and technological progress by constructing Cobb-Douglas Production Function.In the end, the paper provides several constructive suggestions on the basis of the empirical research conclusions, namely optimize the structure of Shanghai financial industry further, use the impact of Internet Finance as an opportunity to re-structure the business model, maintain the healthy and stable development of the securities and futures market, accelerate the introduction and cultivation of high-end financial talents, strengthen financial innovation, accelerate the conversion of innovation into real output and so on.