Financial Development And Economic Growth

Finance is the core of modern economy. Financial development plays an important role in capital accumulation and economic growth. Well-developed finance market and successful transition system serves the saving growth and transition of savings to investment, which push capital accumulation, technical improvement and sustainable economic development. , the mutual stimulating phenomenon between financial development and economic growth seems very obvious in the economy of the developed countries. The study of their relationship has grew into a mature theoretical system in these countries. Probing into the economic growth of China, The correlation of the finance development and economic growth still exists controversy.This thesis analyzes the mechanism between economic growth and financial development which lie on three aspects: saving, the ratio of investment and capital marginal productivity. In the empirical research, this thesis select the new indexes of economic growth and financial development because of China's specific conditions which exists the bank-led finance system and the restructured economy .After considering the instability of the variables,the thesis uses Johansen cointegration method to vertify that there exists a stable long-term relationship between the financial development and economic growth. Then uses the error correction model analyze test, The results show that the expansion of the scale of China's financial, financial structure optimization and financial efficiency can promote the growth of the non-state-owned industrial , but financial Structure has negative impact for the growth of the total economy. Lastly,the thesis uses the Granger causality test to study the causality relationship of finance development and economic growth, the resoults shows it is a two-way causal relationship between Financial Structure and non-state-owned industrial growth , Other indexes of financial development and economic growth exist one-way causal relationships ,it means China still remains the financial development stage of "supply leading".