Empirical Research On The Relationship Of The Stock Market And Economic Growth Of China's Banking

The classic research on the relationship between the financial development and the economic growth can be traced back as early as to Schumpeter(1911) and Goldsmith (1969).Since then, the relationship of "the financial development-the economic growth" (a finance-growth nexus) has always been an important economics research topic.Many scholars have had a profound and extensive study on the relationship between financial development and economic growth from theoretical analysis and empirical testing perspective, for individual countries and a number of countries and different industries and enterprises, using cross-sectional data and time sequence data and panel data.Since the reform and open policy, China's economic growth has obtained the achievement which focuses attention on the common people.Many Chinese and foreign scholars have conducted in-depth research on the source of China's economic growth, but so far each kind of research was almost stresses on the investment level or the investment efficiency's contribution to the economic growth during various periods, with less focuses on the relationship between the multiple financial developments and the economy growth. In fact, the complicated relationship is pivotal to the economy growth.During China's more than 20 year reform development, the bank system has been playing a huge role in the capital allocation, making a significant contribution to the economic growth.Along with the rise of the stock market and the fast development of direct financing channels, the stock market has been playing a more and more obvious role in the economic growth.Which plays a more important role in the economic growth, the bank or the stock market? How to deal with the relationship between the bank development and the stock market's development?This paper strives to combine theoretical analysis and empirical testing,taking modern econometrics as a means of measurement,explore the mutual relationship between finance development and economic growth from bank and stock market's perspective.First an overview of relevant literature both at home and abroad, followed by theoretical analysis,which elaborated in detail the basic principle of the interaction of the bank (the main financial intermediaries)and the economic growth and that of the interaction of the stock market and the economic growth, and that of the interaction of the bank and the stock market, then the empirical analysis on the three bodies's relationship with the modern econometrics method,mainly using the Vector Autoregression (VAR) model proposed by Sims in 1980 and the cointegration theory propoed by Engle and Granger in 1987,Finally the summary of the empirical Analysis results,and its brief underlying reasons,and some policy recommendations for the development of both the bank and the stock market in China.The empirical Analysis results indicated that , the bank's contribution to the economic growth was larger than that of the stock market, and the bank was still the principal part of the allocation of China's financial resources, while it was bad for making the most of credit resoures to put too much credit resoures in the state-owned enterprises.It was beneficial to the economic growth to expend the stock market's scale and to have a appropriate stock market variability.But the stock market had played a weak effect on the economic growth.Besides, the high speculation which was highly correlated to the high fluidity in the stock market is disadvantageous to the economic growth. There was a dynamically complementary relationship between the bank and the stock market in some degree.According to the above, the paper point that under the current situation in China,we should continue to play a bank based indirect financing in the financial role in the allocation of resources, but should optimize bank credit structure and create conditions to encourage banks to provide much more credit to non-state-owned economy, simultaneously continue to advance the state-owned commercial bank's joint stock system reforms.In view of the fact that stock market has a relatively weak role in national economic development, China's stock market should be further standardized, multiple levels of the market system built, the governance structure of listed companies improved,and the stock market with excessive speculation governed. It will push the economic growth to Deal properly with the relationship beteween the bank development and the stock market's development, and make up a relatively harmonious and healthy finance market.