The Theory And Empirical Analysis On Financial Development And Poverty Alleviation

Due to the accelerating process of economic globalization,financial stability has become a key factor in the economic development,scholars began to explore the poverty problem from the new perspective of financial development since 1990s.After years of financial liberalization reform in "BRICS" countries,financial sector has made considerable progress,and the economic growth rate has been greatly promoted as well.In the meantime,living standards has been significantly improved and the number of the absolute poor has been declining constantly.But we should also notice that Gini coefficients has been rising and the enlarged gap between the rich and poor.The main objective of this paper is to study the effects of financial development on poverty reduction in the "BRICS",countries.First,this paper reviews the latest theoretical and empirical study on the problem,and discusses the two mechanisms of financial development on poverty.Then,we will take a descriptive statistics on the present situation of financial development and poverty reduction in these five countries,and we find that their financial development and poverty alleviation have made remarkable achievements.In order to find out the effects,We are going to build a model over the period of 1993-2014 and using Johansen cointegration test method.The results generated by this study have identified that financial development reduce poverty in these five countries,Furthermore,our results show that the increase of M2/GDP can significantly reduce poverty,and Granger causality test finds that the causality nature between financial development and poverty reduce is bi-directional.Finally,taken the present financial and poverty status of China into consideration,we put forward relevant policy suggestions based on the empirical analysis.