Research On The Relationship Between Financial Development And Economic Growth In China

Finance lies in the centre of modern market-economy and plays a very important role in economic stability and development. Allen and Qian( 2005) adopt the financial development indicators suggested by Levine(2002) to analyze the financial development in China and compare the results with LLSV countries, which reflects that China' financial development has little effect on its economic growth. This literature only uses time-point data to analyze this relationship, so this paper tries to adopt time-series data to discuss this subject again.The domestic literature examines the relationship between China' financial development and its economic growth from a single aspect of the financial development and conclude that there is positive relationship between them, however, this can not compare with the conclusions made by AQQ(2005) directly because they use different indicator systems. Therefore, this paper uses the financial development indicators suggested by Levine(2002) and adopts data from the year 1985 to 2005 to explore the relationship between China' financial development and its economic growth and obtain the conclusions that China's financial development has significant effect on its economic growth, which is different from AAQ(2005)'s theory.