Empirical Study Of The Relationship Between Financial Development And Economic Growth In China

The economic development of china has made remarkable achievements since reform and opening up. The economic growth keeps a fast speed, with the financial system reform depening. In the critical period of economic restructuring and financial system reform, is there any relationship between financial development and economic growth? What a role does financial development plays on economic growth? What are the problems of China's financial system? This paper will make an empirical analysis on the relationship between China's financial developmet and economic growth to find the answers.The research on the relationship between financial development and economic growth is one of the hotspots of economics. First, this paper reviews traditional financial theory about the relationship between financial development and economic growth, then discusses the the effect mechanism between financial development and economic growth based on the systemic heckling the theoretical and empirical research about financial development and economic growth. Second, points out the problems of financial development in China through a detailed review and analysis about the development process of China's financial system since 1949. Third, this paper constracts some suitable measure indexes of financial development and economic growth, and researches the causality between financial development and economic growth by ADF test, Cointergration test, Granger causality test and other econometric methods and use of the data between 1991 and 2009. Then this paper establishes some regressive models to make empirical analysis the effect of financial scale, financial structure and financial efficiency to economic growth and economic efficiency. The main findings of empirical analysis are: There is one-way causality relationship between financial development and economic growth; China's finance plays a not significant role in promoting economic gromth, financial development has a negative effect on economic efficiency; the financial market is more efficient than banking system in capital allocation. Based on the empirical analysis, this paper gives some policy suggestions: promoting market reform of the financial system; improving the capital market; improving the financing environment of non-state economy; encouraging financial innovation and enhancing the scientific supervision of financial sectors.