The Change Of Financial Structure And Optimal Financial Structure

In traditional view, by comparing the importance of banks and financial markets, they classified Japan and Germany as bank-oriented financial system, United States and the United Kingdom were classified as market-oriented countries. Two different financial systems had made tremendous contributions to the country in the second half of the20th century. The economies of these countries showed a "convergence" phenomenon. So the market-oriented financial structure and banking-oriented financial structure had become the most debated issues, financial structure seemed to become a selectivity problem. However, this paper confirmed the financial structure was not an optional issue; financial structure had its own rules of endogenous development.In this paper, the total value of the stock market/banking private credit (direct and indirect financing of the proportional relationship) to measure the rate of financial structure. First of all, we had developed through cross-national data on the different economies of the statistical analysis, in the low-income economies, the average financial structure was only0.46, in the average middle-income economies financial structure rate rose to0.54, in the middle-high-income economies, the average rate of financial structure rose to0.62, in the high-income economies, the average rate of the financial structure tremendous reached1.12, so we could conclude that with the development of the economy financial structure become higher, that was the status of the bank was declining and the financial markets was rising. Secondly, by analysing the United States’typical time-series data, we get the same conclusion. In the early stages of the U.S. economy was in the low level of economic development stage, more inclined to bank finance-oriented, as the U.S. economy continues to develop, the financial market began to dominate the financial system. We also observed time series data financing structure in Japan and Germany, found that although the financial structure of Japan and Germany was still a bank -oriented financial system, but its financial structure, with the economic development, the position of banks was also getting down and financial markets was rising. So I guessed there minght be a close relationship between financial structure and economic development. In this paper, based on a general equilibrium framework, we established a dynamic model of financial development and financial structure, as explained in the relationship between financial development, financial structure and economic development, further confirmed the previous conjecture.After conducting a theoretical model analysis, we analysised the relationship between financial structure and economic development (GDP per capital) in long-term perspective. The result showed that relationship between the rate of the financial structure and economic development is significant. Second, we used the dynamic panel models in short-term studied the relationship between financial structure and economic growth, the results showed a significant correlation between the two, indicating that the country’s financial structure of the higher rate when economic growed faster. Taking into account that the relationship between financial structure and economic growth might be non-linear, in order to avoid artificially divideding in different stages of economic development might bring bias, this paper also used a threshold model, based on the characteristics of the data itself to endogenous division interval, and then studied the relationship between financial structure and economic growth in different stages of economic development, the results found that in different stages of economic development, financial structure had different effects on economic growth. When the level of economic development was low, the financial markets (stock market) was not conducive to economic growth and development of the banking system had a positive effect on economic growth; when the level of economic development was at a medium, the financial market (stock market) became more important than before,and the banking system became weaker to economic growth; when the level of economic development was high, financial markets play a more important role in economic growth than banking system. Faced with non-normal distribution, the quantile regression coefficient estimate was more robust, the paper also used quantile regression to analysis relationship between long-term financial structure and economic development, the result showed that both the stock market banks had positive effect on ecomomic, but their role of the marginal contribution was different, with economic development, the contribution to the economic delopment of the securities market was growing, the economic delopment of banks on economic development was decreasing. In the lowr level of economic development, financial structure was more suits for bank-oriented, in the high level of economic development; the financial structure was more suit for market-oriented. This conclusion is consistent with the previous conjecture.In addition, we analysised optimal financial structure. Through the fastest economic growth rate of31economies in1985-2010data from a long-term perspective measured the optimal financial structure. And then used the result to measure104economies’s optimal financial structure and calculated the financial structure gap. Finally we measured financial structure gap and economic growth by quantile regression. After controlling series of macroeconomic variables and policy variables, the study found the financial structure gap and economic growth was significantly negatively correlated with financial gap absolute regression coefficient-0.145, and at the5%level significant, indicating that the financial structure deviation from optimal financial structure would hinder economic development. While the previous chapter analyzes the financial structure obtained with the economic development of financial markets tend increasingly dominated, but it should also have to follow certain rules, step by step, through the chapter analyzed the development of the securities market despite the economic growth and economic development were of great significance, but it could not be rushed, to make the financial structure to maintain a certain percentage of the rate could only effectively promote economic growth. Securities and bank should maintain coordinated development of economy in the level of optimal financial structure rate is the goal of our pursuit goal.Finally, we analyzed Chinese financial system, the current financial structure is still bank-dominated, but the role of stock markets becomes more important on economic development. China’s financial structure policy adjustments can be two-pronged approach:For the stock market, it should develope multi-level capital market (including bond and stock markets; including the venue and the OTC market), increasing proportion of direct financing, improving financial structure, strengthening the legal system securities market; for the banking system, the first that interest rate should market-oriented;second, banking supervision should be differentiated; third, private banks should be encouraged; last, we should establish a deposit insurance system.