Research On The Relationship Between Financial Development And Economic Growth In Northwest Underdeveloped Areas

Comrade Deng Xiaoping once said:"Finance is very important that it is the core of the modern economy." Comrade Deng's speech was concise but rich in content, and brilliantly expounded the importance of finance in the modern economy. We know that in developed regions, the financial role in promoting the economy is evident by academics after a proof of the theory and practice, but, for the less developed regions, is the role of finance for economic development also of so importance? In the process of economic development is also skillfully deflected the question? While the less developed regions is consistent with these conditions? This is the text to be explored.In reviewing the analysis of financial development and economic development issues, this paper is from the perspective of basic financial function in the economy to analyze the problems of development of less developed areas, and made some of countermeasures and proposals which are suitable for the less developed Northwest regional economic and financial. With the same cultural background and economic development level of the northwest vast area, this paper chose Tianshui City to represent the northwest areas, as a representative selection of its 1998 and 2008 economic and financial data, using co-integration test, Georgia Granger test and other statistical methods to find out its financial development and economic development, relations and on this basis to analyze the reasons and expanded throughout the less developed regions, the final recommendations to propose a solution.This paper is divided into five parts for analysis and presentation:The first part introduces the topics of the contextual meaning of the article in the background under the analysis of the regional financial development and economic development of the relationship between the analysis of the financial system. Then paper describes the desired goals, through the empirical study of Tianshui City, the paper want to find the relationship between financial development and economic growth and to explore the reasons of northwest less-developed regions, the final point of the article, as well as shortcomings innovations were introduced.The second part is a literature review, first of all, we clearly defined the less developed regions, as well as the main object of study——the Northwest less developed areas. Second, the paper reviewed theories of financial development and economic development in chronological order. And then focuses on the concept of financial functions related to the content analysis of the six financial functions——provide price information to assist in coordinating the decision-making in different economic sectors to address the incentive problems caused by asymmetric information. AK model for the subsequent use of the financial functions derived conduction mode in the economy, and to extract the financial development in promoting economic development, that is finance in the economy to function conditions.The third part is the main part of empirical analysis. Select the Tianshui City as the sample city. Choose nearly a decade (1998-2008) economic data, application ADF test, co-integration test and Granger causality test of statistical methods in Tianshui City, financial development and economic growth, the relationship between empirical research and the establishment of the relationship between economic growth and financial development of econometric models, we have three conclusions, first, in the sense of Granger tests are not promoting economic growth and financial development reasons, but economic development is, however the reasons for financial development, and the two is a negative correlation between the less developed regions is verified financial development and economic development there is the "threshold effect"; second, per capita income and financial-related relationship between the ratio of negative correlation, indicating the existence in less developed regions, the marginal savings decreasing situation; third, investment and finance-related negative correlation between the ratio, indicating no strain on already limited the efficient allocation of capital, financial institutions were not effectively improve the efficiency of capital output, which proves the financial, in exercising its function of three link are subject to certain obstacles, so that financial development can not effectively promote economic development. Part IV in the previous chapter on the basis of empirical analysis, which are summarized and finishing the north-west financial development in less developed areas the problems come to less developed areas of financial constraints the main factor in the development of the financial system is imperfect, poor coverage, the efficiency of financial institutions, is low, market growth does not sound basis for financial development in weak, resulting in inadequate financing from outside the region where the source of endogenous financing channels are blocked, the allocation of limited funds null and void, making the financial can not effectively play its functions.Suggestions fifth part, the author analyzes the text on the basis of the former, considering the less-developed areas northwest of special geographical and cultural background, and then from both the macro and micro perspective in the northwest made suitable for the specific economic and cultural context of policy proposals, such as accelerating the financial infrastructure, optimize financial ecological environment, improve the financial system, and promote interaction of financial and economic policy proposals of recommendations, including the building of financial markets to accelerate and enhance the efficiency of financial institutions, to foster diversified financial institutions, to develop the economic base, promote less developed regional financial endogenous development.Innovations of this article is twofold:First, from the perspective of financial capabilities, in connection with the reality of development of Tianshui city, take financial development theory as a guide and use the econometric methods of Tianshui City Economic growth and financial development of the empirical analysis of historical data to explore the small-scale regional financial development and economic growth relationship between the qualitative and quantitative analysis within the framework of specific environmental and regional financial effect on the economy in such manner and cause obstruction and thus reasonable, feasible policy recommendations. Has distinctive characteristics of the times and practical significance; second is based on a breakthrough in Tianshui City of Gansu Province, from the individual to the general, through empirical studies to reflect the city's economic and cultural backgrounds similar to financial development in less developed areas the problems and propose the improvement of practical recommendations, with a strong realistic and feasible.