An Empirical Study On Impact Of The Financial Development On Economic Growth In Laos

With the continuous development and transformation of economic globalization,its core has been transformed into financial globalization.Financial industry has gradually grown into an important pillar of the national economy.And the role of financial development in the economic growth of a country is also becoming apparent.So,more and more economists are beginning to pay attention to the relationship between financial development and economic growth.Most scholars use empirical analysis method to research the relationship between the financial development and economic growth.However,the different methods of research lead to different conclusions.In general,scholars at home and abroad have basically reached a consensus on the view that financial development has a certain effect on economic growth.Based on summing up the related theories and research methods,this paper selects 1996-2016 relevant economic data to study the relationship between Laos' financial development and economic growth.Though this empirical study,it is proved that the Laos' financial development has a certain effect on economic growth.The result of cointegration test show that there is a long-term relationship between Laos financial development and economic growth.According to Granger causality test,at the 5% level,the ratio of money supply to GDP is the Granger cause of the real GDP growth rate,the real interest rate is the Granger cause of the real GDP growth rate.At the 10% level,the real GDP growth rate is the Granger cause of the real interest rate.Through the model test,it is found that the effect of money supply and real interest rate on economic growth is the most obvious.According to the results of empirical research,the paper puts forward the corresponding suggestions:(1)sound the financial infrastructure,steady financial and economic growth;(2)promote diversified financial development,improve financial services;(3)improve financial development policies,improve the efficiency of financial operation;(4)maintain stability of currency,prevent inflation problems;(5)accelerate the construction of supervision system,improve the financial supervision system.