Stock Market, Financial Structure And Economic Growth

Strict according withs tandard economics research methods, the paper builds the interaction mechanism between variablesa nd establishment of appropriate measurement model for empirical analysis of the relevant samples. Using the thoughts above, with attention on the relationship between the stock market developments, financial structure and economic growth, we get quiet rich conclusion.Theoretical studies suggest that the development of the stock market can promote economic growth, part of the empirical literature supporting this. However, the existing literature does not form a complete theoretical system framework about how development of the stock market to promote economic growth, whatt he role of the channels is, and how the interact mechanism is and so on. Along the theoretical analysis framework designed by Pango, we divide the mechanism that the promotion from the development of stock market to economic growth into macro,industry and micro three channels, to establish a complete system of theoretical framework in which stockm arket development affects economic growth. For the macro-mechanism of stock market development to economic growth, the stock market can directly or indirectly affect the economy Growth by market size and price fluctuations, business investment spending, consumption, foreign investment inflows and the role of monetary policy effects, etc. The size expansion and financial innovation deepening of the stockm arket, improves the convertible in the variety of financial assets and improve the financial system, reduces transaction costs in the market. With the expansion of the size of the stock market, the financial market asset prices elastic of interest rate get bigger, which reduces the interest rate transmission channels effects of monetary policy. The stock market developments affecting thes ensitivity of the actual investment expenditure, financial investment preferences and transaction efficiency as well as the proportion of commercial bank loans in the economic system, which makes the transmission channels of credit more complex and non-certainty. The effects that stock market influence on the monetary policy transmission mechanism reduce the effect of interest rates and money supply as the intermediate target of monetary policy. As corporate finance platform, the stock market can phase out the excess industry through transferring the stock funds to the industry which has incremental profitability and innovation, meeting the capital needs of emerging industries, upgrading the industrial structure, promoting the sustainability of economic growth.The result of the stock market promoting optimal adjustment ofi ndustrial structure, on the one hand makes the natural resources in declining and orderly industry transfer to high-growth emerging sectors, to achieve the purpose of industrial structure upgrading rapidly. On the other hand, optimization adjustments of industrial structure of the stock can raise the expansion speed of the emerging industrial sectors with high growth potential rate with capital stock remains unchanged, thus speeding up the process of rationalizing the industrial structure. Ont he micro-channels, as the testing ground for innovation and enterprise system to promote business efficiency, the stock market could increase the using efficiency of capital, improve corporate governance structure and provide a fair trading platform of property rights trading. In examining the positive effect stock market development to economic growth, the article has focused on analysis of the dynamic relationship between the stock market development, financial structure and economic growth。Studies suggest that, As the supplementary means of bank credit, stock market development can act as a "spare tire function" to make up the shortage of bank credit-market, improve market liquidity, lower financing costs and improve market efficiency, enhance the soundness of the financial system architecture, as well as vertical market efficiency and function of depth. But the inherent value of the stock market assets may be invested property, making the roleo f the stock market in the economy is not entirely the same as bank credit. The stock market not only has an impact on the economy's incremental capital by raising capital but also through the price volatility of capital stock of the real economy.Based on the mechanism that stock market affects the economy through the price volatility of capital, we propose the optimal scale of financial analysis model. Using of mathematical models analysis, we find that the growth of profits of the real economy should be divided through "Rent" and "Fees" and other means in production field and in financial system. The development of market scale can reduce the cost of financing, but with the expansion of the scale, their participation in the total amounto f profit allocation is also growing. Therefore, there is an optimal finance system scale corresponding with the real economy. The profit can adjust the social capital between the financial system and the reale conomy as the flow between as the leverage. Market can not make the capital reach the optimal size between the financial capital and the working capital on its own. And then it needs the power of the executive or the large exogenous shocks to complete the balance between the two.In addition, the study also pointed out that even a country has the right size of the of financial economy, if the financial sector's profit margins is much higher than the productivity of the real economy, the finance system would "Siphon" the from production field capital, reducing the rate of capital accumulation in the real economy with a "Crowding Out" effect, thereby affecting the economic health and sustainable development.Based on theoretical analysis, the article attempts to find the corresponding empirical analysis to support the theoretical research point by drawing on available of the sample data. In the empirical research process, adding indexes as much as possible, just as the representatives of capital accumulation, technological progress, financial deepening, and the state the degree of openness, governmente xpenditure and other important research targets. Drawing the following empirical conclusions:Without taking the exogenous shocks into account, under the condition of the capital accumulation in mature capital markets is significantly higher than the developing countries, the financing role ofs tock market in the finance system is relatively not very significant. Taking into account the level of capital accumulation factors and the role of the financial structure, as a testing ground for financial innovation, the liquidity and trading volume of the stock market has speculation color, making it the function of reducing transaction costs greatly diminished, and the direction in promoting economic growth has become uncertainty and not significant. From the finance architecture, the total bank credit has showna significant negative correlationw ithe conomic growthdu ring the entire sample in OECD countries. The scale of bank credit to private sector shows a significant effect in promoting economic growth. Bank credit to privates ector belongs to market behavior, being not so obvious subject to government administrative constraints, the role of the optimization of the allocation of capital and economic growth reflects its pro-cyclical consistentw ith the theoretical analysis.Empirical findings in developing countries show that:capital accumulation and openness measured by trade as well as technological progress driven significant positive effect to economic growth. Government spending and bank credit have appeared in the negative correlation ofe conomic growth. Difference ism ainly reflected in the following two points:first, in the process of developing countries, there is no negative correlation phenomenon between financiald eepening and economic growth, mainly fori n developing countries there is still in the golden era ofc apital accumulation and financial deepening with the role in promoting capital accumulation and increasing economic growth. In order to furtherp robe into the relationship between finance development and economic growth, the research sets panel inspection system by adding exogenous shock indicators, stock market, the threshold effect of test item of stock development, the banking system of exogenous shocks on the economy and the stock market test items exogenous shocks on the economy test items in China's provinces and cities.Using the GMM dynamic panel data approach to empirical analysis with the data about the stock market, financial structure and economic growth of China's 30 provinces and autonomous regions during the period of 1991-2008, it shows:The capital accumulation, human capital investment, trade openness, FDI andg overnment current expenditures promote a clear positive effect on economic growth. Perspective on specific exam system, Bank credit could reverse economic growth with one lag, its test items show signs that bank credit has played a role in smoothing buffer effect on the economy with exogenous shocks; The capital financing from the stock market has a significant effect on promoting to economic growth with an "Inverted U-effect." Integrated in the banking and the stock market, the negative effect of bank credit on economic growth becomes not obvious, but the promotion of stock market to economic growth is still more remarkable; banking development and stockm arket development makes the impact of exogenous shocks on the economy role no longer apparent. In addition, as China's main capital source ofr eal economic growth, the stock market financing, bank credit and FDI have more or less homogeneity or heterogeneity. Different types of capital role in promoting economic growth depend on the relationship between the others.Under the capital certain requirements conditions, there are not only the "Complementary Effect" but also a certain degree of "Crowding Out" between different types ofc apital. This kind ofc rowding-out effect is affected by theh omogeneity of capital and the total amount of capital stock. Strongert he homogeneity is, the more obvious the crowding-out effect is; more abundant the capital stock is, the crowding out is more remarkable.The subsequent empirical analysis confirms the correctness of the theory of the article. Empirical study discovers, there was a significant "Spillover Effect" of bank credit to finance stock market, while there was a significant "crowding out effect" of the FDI to the stock market, this "crowding out" or "spillover" effect between variablesi s endogenous, and is not subject to the impact of other control variables.Finally, it is the conclusion of the paper. With in-depth analysis of China's current stock market development and finance development, based on the empirical analysis of that finance deepening for economic growth exists "Inverted U-effect", we give some suggestion on how to develop the capital market in our country, with Stable economic growth. The article highlights that we must pay attention to the quality of capital formation, rather simply than the total scale of financial deepening, through the means of financial deepening process of promoting economic growth, with strengthening government supervision.