The Influence Of The Financial Capital On The Economic Growth

The reason, internal mechanism of the economic growth are the core issue in the economic theory. For a long period of time, economists generally concerned about the relationship between the GDP growth with the capital accumulation, labor growth and technology progress. After the 20th century 70s, the amounts of the bonds, stocks and the derivatives have been growing rapidly. Lots of countries have made the financial capital an important means of achieving the economic growth. Therefore, we should have some study on the financial capital, such as, what is the real relationship between the financial capital and the economic growth? In addition to the entity capital, labour, technology progress, whether the financial capital a main factor that impact the economic growth. The reason of the early 80's debt crisis in the developing countries, the late 90's financial crisis in the Southeast Asia and the world financial crisis now, has some relationship with the financial innovation and reform. According to the modern development finance theory, financial capital is not the reason of the financial crisis, and if we can manage and control the development of it, the financial capital can even avoid the financial crisis. So, the study on the financial capital is helpful to China's financial system reform and is useful to resolve the financial crisis now and prevent it in the further.In general, regarding the correlation between development of financial capital and economic growth, the modern economics theory is not enough systematic and comprehensive. In foreign country, the study is focusing on the financial development influence on total growth of economics. Most of them prefer to study about financial as a economic department and industry, to analyze the influence of development of this department and industry on economic growth, rather than explain the whole society economic development due to financial development. In China the theory generally is only at the stage of issuing questions. But the complete theory system for financial capital and economic operation is not built up yet. This paper builds up a financial capital endogenous production function based on Cobb-Douglas function, which totally separates the physical capital and financial capital to study the continuity of economic development. In content, the first part describes the property and connotation of financial capital, and expanses the bound of financial capital concept, and generalizes the characteristic of modern financial capital. The second part describes the modern economic growth theory, with the analysis of several production functions including each assumption, type and property, to explore the relationship and difference of these functions. Also with the study of the application in economic growth model, the second part analyzes the relationship between production function and economic growth model. The third part builds up the economic growth model based on endogenous financial capital according to Cobb-Douglas Function, and analyzes the economic sustainable development considering the financial capital as the endogenous economic variable. The fourth part concludes the inspiration for China Financial market development based on above analysis, and wishes this paper will have a helpful effort for China financial market build up and financial system reform.