| Since the reform and opening-up,China's economy has maintained rapid growth based on demographic dividends and a large amount of capital investment.However,after the global economic crisis in 2008,with the gradual disappearance of the demographic dividend,the development model of relying on investment,lowend product export,high pollution and high energy consumption,the current pattern of development is unsustainable.China's economic growth has gradually shifted from high-speed growth to medium-high-speed growth,entering the "New Normal" era.To ensure the sustainable development of China's economy,the economic structure needs to be further optimized and upgraded,and gradually shifts from factor-driven and investment-driven economy to innovation-driven economy.Financial sector(including financial institutions and financial markets),as one of the core sectors affecting a country's economic growth,raises funds for potential investment opportunities and innovative projects in the market by absorbing large amounts of social idle funds,thereby improving the efficiency of fund allocation and enhancing social production and promoting economic growth.Therefore,as an important topic of economics,the relationship between financial development and economic growth has been widely concerned and intensively studied by academics and government departments.How to further improve the level of financial development to enhance capital allocation efficiency and total factor productivity,promote the upgrading of industrial structure,and develop into a new development model led by innovation,are the problems that must be solved in the future.According to World Bank,financial development refers to the process of reducing the costs incurred in the financial system of acquiring information,enforcing contracts,and various types of financial transactions.From three different perspectives representing financial development,namely,improving the efficiency of financial institutions,relaxing financial constraint on firms' R&D investments and relaxing individuals' credit constraint,this paper explores the underlying mechanisms and channels that how financial development promotes technological progress,industrial structure upgrading,urbanization,economic growth and economic convergence in developing countries.Accordingly,this paper also proposes corresponding financial reform and growth-promoting policies.This paper consists of six chapters.The specific research structure is shown as follows:Chapter 1 is an introduction.This chapter explains the research background and research meaning,describes the main research ideas,research methods,shows the research framework,and lists the academic contributions and shortcomings of this paper.Chapter 2 is a literature review.This chapter systematically sorts out the empirical and theoretical literature on financial development and economic growth from China and abroad,and summarizes the main sources of endogenous economic growth,including technological progress and human capital accumulation.This chapter also summarizes the empirical findings and underlying mechanisms and channels.After reviewing the existing literature,this chapter points out the inadequacies embed in the existing literature,which leads to new research directions,and shows the academic value and contribution of this paper as well.Chapter 3 discusses the impact of financial development represented by the efficiency of financial institutions on economic growth and social welfare.Specifically,this chapter introduces money and banking sectors into an innovationdriven growth model.Based on the analyses of the impacts of the three monetary policy instruments on economic growth and social welfare,this chapter further analyzes the impacts of banking sector efficiency on the effectiveness of monetary policies(growth effects and welfare costs).Given the results of numerical analysis,we obtain the corresponding policy recommendations about the choice of optimal monetary policies.Chapter 4 examines the impact of financial development,represented by relaxation of corporate credit constraints,on industrial structure upgrading and economic growth in developing countries.This chapter first empirically analyzes the impact of financial development on economic growth at different stages of development.Secondly,by constructing the Schumpeter growth model with imitation and innovation,this Chapter analyzes the important role of financial development in the industrial structure upgrading,economic growth and economic convergence of developing countries.Thirdly,in the process of industrial structure upgrading and economic convergence,the dynamic path of the required financial development level is presented through numerical simulation method.Finally,based on the results of analytical results and numerical simulation,we obtain the policy recommendations that how to match financial development level and industrial structure upgrading dynamically at different stages of development.Chapter 5 studies the impact of financial development,represented by the relaxation of personal credit constraints,on China's migrant workers' savings,human capital accumulation,income distribution,urbanization and economic growth.This chapter first empirically examines the difference in savings rates between migrant workers and permanent immigrants,and further finds out that human capital differences are one reason causing the savings rates differences.Secondly,given the empirical analysis,this chapter constructs a three-periods OLG model involving human capital heterogeneity and individual credit constraint.Analytical analyses show that financial development can promote the accumulation of human capital,realize the conversion of household registration status for migrant workers and promote economic growth.Thirdly,using numerical analysis methods,this chapter shows the effects of financial development on important economic issues such as migrant workers' human capital accumulation,consumption inequality and urbanization rate.Finally,given mathematical analyses and numerical simulations,we obtain financial reform policy recommendations for promoting human capital accumulation and urbanization,as well as related policies preventing the income inequality from expanding.Chapter 6 presents research conclusions and policy recommendations.By combining all the results from theoretical,empirical and numerical analyses,this chapter summarizes all the conclusions and proposes corresponding policy recommendations,and points out further research directions.The main findings of this paper can be summarized as follows:First,to analyze how financial development,represented by the efficiency of financial institutions,affects the growth effects and welfare costs of monetary policies,theoretical analysis in Chapter 3 shows that increasing money growth rate,required reserve ratio and leverage ratio will reduce the long-term economic growth rate,while the relative size of the growth effects of three monetary policies depends on financial sector's operational efficiency.Based on qualitative analyses,Chapter3 also employs macroeconomic data to calibrate the model to quantitatively analyze the effects of the three monetary policy instruments,and simulate the impacts of financial frictions on monetary policy instruments' growth effects and welfare costs.Simulation results show that the required reserve ratio has the greatest impact on economic growth and welfare costs,while the impact of money growth rate is the least,and the impact of bank capital leverage is somewhere in between.Further counterfactual analyses show that if financial friction becomes large enough,the growth effect and welfare costs of banks' leverage ratio will become the largest,implying that choosing an optimal monetary policy tool would depend on the efficiency of the banking sector.Secondly,will financial development,represented by financial support for technological advancement of enterprises,affects technological progress,industrial structure upgrading,and promotes the convergence of developing countries to developed countries?Analysis results in Chapter 4 show that,given the development stage and technical level of a country,there exists not only an optimal technological progress mode and corresponding industrial structure,but also a minimum requirement for the degree of financial deepening.Failing to meet this minimum requirement will deprive the country's ability to achieve the next phase of industrial upgrading.Moreover,in the process of development,the minimum requirement for industrial upgrade on financial deepening is not static,but are characterized by a rapid increase and a slow decline after reaching the middle-income level.Besides qualitative analysis,Chapter 4 also adopts the calibration method and simulates the dynamics of financial development level required to support industrial structure upgrading and cross-country convergence.Numerical results show that,under the constraint of relatively limited capital,to transform from imitation to innovation,it is necessary to first realize the leap-forward improvement of financial deepening,otherwise it may fall into “imitation trap”,squatting at the middle-income level.Finally,will financial development,represented by personal financial support,affects migrant workers' consumption and savings in different life phases,migration decisions,and further affects urbanization and economic growth?Analytical results in Chapter 5 show that:(1)Compared with migrant workers who enter the city and eventually become citizens,the savings rate of returning migrant workers is higher;(2)Improving the level of financial development helps migrant workers alleviate their learning and training time,thus promoting human capital accumulation and sustainable economic growth;(3)As the level of credit support for migrants rises,although the number of farmers working in cities will increase,financial development does not necessarily promote the settlement of migrant workers in cities and urbanization.Only when financial development leads to a higher consumption growth rate for migration,the human capital threshold for migration will decline.In this case,more migrant workers will become citizens.Similarly,besides qualitative analysis,based on China's macroeconomic statistics and survey data of migrant workers,Chapter 5 carries out parameter calibration and numerical simulation.Simulation results show that as financial development(and the cost of entering the city)continues to rise,the overall level of consumption inequality of migrant workers will be hump-shaped,increasing at first and then declining.This paper contributes to the literature in the three following ways:(1)perspectives of research questions;(2)innovation in the theoretical analysis framework;(3)new results and policy suggestions from quantitative analyses and anti-factual analyses based on new theoretical frameworks.Firstly,unlike the existing literature,Chapter 3 mainly analyzes the growth effects and welfare costs of financial institution efficiency on various monetary policy instruments,while most of the existing literature only consider the growth effects and welfare costs of monetary policy,ignoring the impacts of the financial sector(banks)on the implementation of monetary policy instruments.In terms of theoretical analysis framework,Chapter 3 mainly contributes to the literature by incorporating financial sector(bank)and three monetary policy tools simultaneously into Romer's(1990)endogenous growth model,and establishing an analytical framework of dynamic general equilibrium model.This new framework enables us to simultaneously analyze the heterogeneous impacts of financial sector efficiency on the effectiveness of the three monetary policy instruments.Based on the theoretical analyses,we further calibrate the model,quantify and compare the differences in the impacts of financial sector efficiency on the policy effects of the three monetary policy instruments.It shows that the central bank should choose the optimal monetary policy tool conditioning on financial sector's efficiency,which has not been demonstrated in the existing literature.Secondly,Chapter 4 simultaneously considers imitation and innovation as the sources of technological progress as well as introduces labor market frictions,mainly focuses on the critical role of financial development in supporting developing countries' transformation of growth engine(i.e.,from imitation to innovation),industrial upgrading and economic convergence.Moreover,Chapter 4also investigates the dynamics of financial development in helping developing countries achieve industrial upgrading and economic convergence.In the existing literature,some papers only consider the effects of financial development on technological progress and convergence(Aghion et al.,2005;Laeven et al.,2015),and some other papers only consider the impacts of imitation and innovation on economic growth and convergence(Segerstrom,1991;Benhabib et al.,2014).While given the importance of imitation and financial development in developing countries,Chapter 4 unifies these two types of studies and introduces labor market frictions,which is widespread in developing economies.Therefore,this new framework can better mimic the economic environment in developing countries and make the analyses and results more applicable for developing economies.Correspondingly,based on this perspective,Chapter 4 further expands the classic Schumpeter growth model by including both imitation and innovation,and focuses on the dynamics of required financial development during the process of growth engine conversion(industrial structure upgrading)and economic convergence.Moreover,given the theoretical model,we also adopt the method of calibration.And numerical results show how the financial development level should be adjusted simultaneously to match(support)the technological progress and industrial upgrading process,which provides a theoretical reference for issuing financial policies.Finally,based on China's household registration system and rural people migrate to urban areas for education and work,Chapter 5 explores how financial development,represented by relaxing personal credit constraint,affects the differences in savings rate,human capital accumulation and migration decisions among migrant workers.To characterize the heterogeneous decision-making of migrant workers about settlement or returning home,Chapter 5 innovatively introduces human capital heterogeneity into a three-periods OLG model.Simultaneously,to capture China's economic environment better,we incorporate several characteristics of China's economy,including the migration cost,financial constraints and wage discrimination,into the research framework.Through mathematical reasoning,it demonstrates how financial development affects the savings rate of migrant workers,human capital accumulation and urbanization rate.Similarly,based on qualitative analysis,Chapter 5 also calibrates the model,and numerically analyzes how financial development influences the human capital accumulation,consumption inequality and urbanization rate of for migrant workers. |
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