| This paper embed Diamond and Dybvig's bank model(1983) into endogenous growth model to analyze the relation of Bank-system stability and economic growth. If the level of BS stability is high, bank can increase investment and human capital accumulation and than accelerate economic growth by providing liquidity insurance. And if the level of BS stability is low, bank run will take place. BS stability also can be affected by economic growth. Higher economic growth can make bank loan obtain more productive return, and make BS stability arrive at higher level. The paper ulteriorly analyzes finance opening and government guarantee's influence to economic growth and BS stability. Finance opening can enhance economic growth and financial stability. Under information symmetry, government guarantee will not influence economic growth, but can enhance finance system's stability. Finally, the paper uses the model to analyze East Asia crisis and Chinese bank reform, and empirically analyze relationship of China's financial development and economic growth.
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