Empirical Analysis Of The Relationship Between Financial Development And Economic Growth In Yangtze River Delta

As a means of allocating economic resources,finance puts economic resources to where it was most needed,witch spurs the economy growth with a fast speed.In the economy system,finance also plays a role of medium of exchange,diversification of risk,reducing the agent cost and do on.Although containing various meanings,the essence of finance is a way of liquidating the future income and can not create value by itself.According to the sixth version of the "world wealth report shows" by Allianz,In 2014,the total of net financial assets exceeded 100 trillion euros for the first time,the degree of financial development has become one of the signs of economic development in a region or country.It was decided at the Third Plenum of the 18 th CPC Central Committee that the market will play a decisive role in allocating resources and the government should better play its role.Streamlining administration and delegating powers is an important starting point in this direction.Financial development and economic growth has become the focus.Yangtze River Delta,one of the most active areas of economy in China,has a better foundation on development of finance and economy than the rest of China.Therefore,it is typical for research the relationship of the financial development and economic growth in Yangtze River Delta.The overall level of each province's economy in Yangtze River Delta is relatively close,but each have their own model of development.It's significant to research this question both the global and the local.On this basis,it is beneficial for government to make appropriate policy,which contributes to economic development.By collating and analyzing the existing paper,we propose improved methods to comprehensively describe the relationship between financial development and economic growth.In order to research this question,we are going to measure the degree of financial development from two aspects—the size of financial assets and the structure of finance.In this paper,we use Financial Interrelations Ratio(FIR)to represent the size of financial assets and Financial Intermediations Efficiency(FEA)to represent the structure of finance.What' more,we need to add three control variables—stock of capital(K),labor force(L),import and export(EX).In the part of empirical analysis,we plan to adopt Vector Auto-regressionModel(VAR).By unit root test,co-integration test,causality relationship test,impulse response,variance decomposition,we research and analysis the economic data we collected.Firstly,we figure out the relationship between financial development and economic growth of Yangtze River Delta.Secondly we explore this question in each province(Jiangsu province and Zhejiang province),and compare the differences among those provinces.Finally we will research the spatial spillover effects of every city of Yangtze River Delta.The test result is that the relationship between financial assets and economic growth of Yangtze River Delta shows positive,but the relationship between financial structure and economic growth is not clear and economic development is not the Granger cause of financial structure.Meanwhile,the result of is similarity between each province and the global and there are positive influence among cities in GDP.In short,we should speed up reform of the financial system and strengthen financial oversight.