The Empirical Study Of Relationship Between The Development Of Stock Market And The Growth Of Economics

The relationship between the stock market development and the economic growth has always been the research topic which attracted the economic scholars. Some scholars concentrated on the empirical study in order to find the answer, and many empirical studies have been made. This article tends to study the relationship between the stock market and economic growth from two aspects, theoretical and empirical aspects. In theoretical part, we first look back the course of the development of this kind of study. The initial study of the relationship between the financial development and the economic growth began with Goldsmith's work in 1969. He adopts the ratio of assets in financial intermediary to GNP to represent the finance development level with the premise that the size of the financial system positively related to the quantity and quality of the financial service. Goldsmith make use of the data from 1860 to 1963 of 35 countries to analyze the relationship of the finance and the economics. From the analysis, he draw the conclusion that economics often growths with the development of finance, especially, rapid growth period of economics accompanies with the extremely rapid development of finance. Some recent research have improved Goldsmith's theory, for example, King&Levine (1993) investigated the methods of capital accumulation and increase of productivity, constructed other indexes which can measure finance development, analyzed whether the finance development level can predict the level of capital accumulation, increase of productivity and long-term economic growth using the data of 80 countries from 1960-1989, with the other factor which can influence economic growth being controlled. Then, on the base of this analysis, combined with the characteristics of the transition periods in China, he pointed out three factors in finance sector which influence economic development: the ratio of savings to investment θt, savings ratio st and marginal efficiency of capital Et. In chapter two, we mainly discuss the influence of stock market on economic growth on the base of resource distribution function and wealth effect of stock market. First of all, the stock market, as the most important trade market of stock ownership, plays an important role on resource distribution. This is because: the stock ownership mobility of listed company offer the mechanism of the fixed price for company's investment, offer the foundation for the enterprises to pursue maximal market value; at the same time, the system of stock market encourage people to collect and deal with information. In stock market, if you want to obtain more income, you must have more accurate information. Since the most important means of resource distribution is the information, the stock will help to realize optimum resource distribution. Secondly, " wealth effect " of stock market means the phenomenon that the rising of the assets price makes assets holder's wealth increase and the consumption expenditure increases. This effect mainly manifested in three aspects: first, expanding consumption through influencing the real revenue of residents; second, expanding consumption through influencing resident's anticipant income; third, influencing the consumption expenditure through changing the situation suppliers, namely enterprises, this is particularly important in our country. In America and European developed country, " wealth effect " of stock market is very obvious. The stock market of our country belongs to the new developing market, " wealth effect " is not still very obvious. In empirical analysis part, we choose the index of stock market to reflect the change of stock market, because the security market of our country is divided into two markets: Shanghai and Shenzhen, we choose SSE composite index in Shanghai Stock Exchange (SZZS ) and SSE component index in Shenzhen Stock Exchange (SZCZ ) as index to study the relationship between two markets and macro economy separately. On the other hand, we choose gross domestic product(GDP), investment in fixed assets (I ), monetary delivery volume (M1 ) and the consumer price index (CPI ) as index to evaluate the economic growth. We first examine stationarity of the variable, through examination, we find that these six arraies are all I(1)(unit root process) time series after seasonal adjustment and being fetched logarithm. Then, according to Johansen Cointegration Test, establish cointegration equation to represent the long-term relation of these variables. The results indicate that there is a cointegration equation between SSE composite index(LSZZS) and LGDP , LI , LM1 , LCPI, named as system 1; at the same time, there is also a cointegration equation between SSE component index(LSZCZ) and LGDP , LI , LM1 , LCPI, named as system 2. Then we set up VAR (Vector Autoregression )model, according to AIC and SC minimum rule, we choose one lag period. From the results we can conclude that SSE composite index and SSE component index are mainly influenced by one lag period of consumer price index and themselves, theother three indexes: gross domestic product(GDP), investment in fixed assets(I) and monetary delivery volume (M1 ) have a little effect on stock market index. Gross domestic product is mainly influenced by one lag period of monetary delivery volume and itself, and these two kind of influences are positive, and the other three indexes have a little effect on Gross domestic product. On the basis of VAR model, we continue to analyze the relation between stock market and economic growth with Impulse Response Functions and Variance Decomposition methods, and we choose 10 periods to observe the results. Then we conclude that SSE composite index and SSE component index all have obvious positive response to their own one standard deviation innovation, but these kind of responses are weakened gradually. And SSE composite index and SSE component index have a little response to one standard deviation innovation of gross domestic product, investment in fixed assets, monetary delivery volume and consumer price index in the first several periods, but in the long run, they almost have no response. According to the Impulse Response analysis of gross domestic product, gross domestic product has remarkable positive response to its own one standard deviation innovation, but this kind of influence is weakened gradually as time goes by, and will disappear at last. Gross domestic product have a little responses to one standard deviation innovation of SSE composite index, SSE component index, investment in fixed assets, monetary delivery volume and consumer price index in the first several periods, but in the long run ,it is only influenced by its own lag period. The results of Variance Decomposition analysis further confirm the conclusion of Impulse Response analysis, and they are unanimous. Namely no matter in Shanghai or in Shenzhen Stock Exchange, as for the indexes which we selected, the fluctuation of the stock market are due to the fluctuation of lag periods of themselves. The macro economy does not have too great influence on them. Finally, we test the Granger Causality of SSE composite index and gross domestic product, SSE component index and gross domestic product separately, lag periods are 4 and 5 respectively. The result indicates LGDP is not the Granger cause of LSZZS; but LSZCZ and LSZCZ are the Granger cause of LGDP, only with faint influence. The results are the same with the...