An Empirical Study On Relationship Between Stock Market And Economic Growth In China

As known to all, financial activity plays a pivotal role in the modern economy. There are a few divergent opinions about the relationship between stock markets and economic growth, although most of current economists agree on the proposition that the financial development promotes economic growth. Economists who support the viewpoint that stock market is related to economic growth and can promote the latter study stock market's impact on the economic growth from its financial ability, liquidity, scale, etc. They believe that stock market can favor economic growth. While some other economists state that there's no relationship between stock market and economic growth. They evaluate the role of stock market from its scale, amount of finance and liquidity, etc.After about twenty years' development, although China's stock market has established steady mechanism, there still exist many problems. However, as China's stock market is still initial stage, it is inevitable that the limitations remain in issuance of stocks, capital structure and the operational mechanism of the stock market, etc. Meanwhile, even the impact on a country's economic growth caused by a developed and perfect stock market remains to be discussed. Therefore, analyzing the relationship between China's stock market and economic growth and evaluating stock market's effects of China on economic growth will not only be the premise to realize the status of stock market in China's economy and to develop and adjust this market, but also be of great importance in the development of China's stock market and even the whole economy.With the development of our domestic stock market and the increasing influence, it is quite necessary for us to solve the relationship between the stock market and economic growth in China systematically and entirely.With a great deal of research datum, and the research method combining Quantitative research into qualitative analysis, the paper carries through deep analysis on the relationship between the stock market and economic growth in China, and in particular demonstrate the relation between them.Firstly, the paper introduces the definition and function of stock market, emphasizes on some overseas and inland famous study result on stock market and economic growth. Based on the researches on the interaction mechanism between the stock market and economic growth, the fourth chapter analyzes the relationship between them by using the co-integration and Granger method. The author choices the correlation indexes in order to verify the connection between the stock market and economic growth in China by metric test, the metric test based on the season serial data from 1996 to 2007. The test shows that China stock market just plays a minor role in promoting China's economic growth. Then, the author study the relationship between the stock market development and economic growth from consumption, investment. It turns out that the stock market affect weakly consumption, investment. To sum up, currently, the relationship between the stock marketdevelopment and economic growth is faint.On the basement of analysis, it tables proposals to perfect China's stock market in order to promote China's growth.