China's Credit Growth And Economic Growth Empirical Analysis

The relationship between bank credit and economic has been of great concern in the academic field. However, the study has not been very systematic yet. Economists have begun to study the subject from the financial aspect recently. Based on the similar cycles of bank credit and economic growth, the paper studies whether there is remarkable correlation and Granger cause relationship between them and the potential problem beneath.Using data from the first quarter of 2000 to the second quarter of 2008, the paper studies the correlation between credit and economic fluctuation. The results show that there is long term cointegration between GDP and credit scale. GDP imposes greater reverse effect when fluctuation occurs. Then we analyse the interaction between the two factors by introducing explanation variables and control variables into the model. We study the Granger causality between the variables, followed by deep analysis of credit factors based on Johansen cointegration test and VEC model. The results show that, there is supply-induced relation between credit and economic growth. And the utilization efficiency and interest should become vital determinant factors of economic growth in the long term. In order to moderate inflation and over-heated economical climate, our economic should be stimulated by consumption instead of excessive credit expansion.