Study Of The Relationship Between Financial Development And Economic Growth

The financial crisis triggered by Subprime mortgage crisis in 2007 brought about tremendous disaster worldwide, hence, aroused people's concern for the financial development. What is the connection between financial development and economic growth after all? Is financial development stimulate or dampen the economic growth? If so, then to what extent the influence it exerted on local economic growth? The present thesis aims to explore these issues with the case of Shanghai.Shanghai is the financial hub of China and even of the Far East since 1930s. In 1990s, State Council of China paid more attention to Shanghai and support Shanghai to establish itself into an international financial center, under the joint efforts of the Shanghai's Government and people,therefore, its finance has undergone a rapid development. Therefore, Shanghai's financial development has the characteristics of nationwide financial development; and it also bears its some unique features. A research on these features is of great significance. The paper can be helpful to the construction of Shanghai's international financial centre; meanwhile it might serve as a reference for the financial development of other regions.The paper focuses on the data concerning the financial development and economic growth from 1991 to 2008, through compiling, summarizing and analyzing a great deal of related papers and documents of financial development and economic growth under Shanghai's rapid development for past recent years. Select the real per capita GDP growth IRGDP and Urban growth rate of real per capita disposable income IYon behalf of Shanghai's economic growth; The financial-related rate FIR,financial system efficiency FL/FS,the ratio of Shanghai Stock Exchange securities transactions and Shanghai's gross domestic product SGDP,the ratio of Shanghai insurance market premium income and Shanghai's gross domestic product INGDP on behalf of Shanghai's Financial Development; For them on cointegration test and Granger causality test. The result is that the financial development can stimulate some extent economic growth.So it has been of great significance for the economic growth of Shanghai and the neighboring provinces even the whole nation at large, to cultivate a mature and sophisticated international finance centre.At last in view of some disadvantages for the construction of Shanghai as an international financial center, this paper provides some tentative suggestion on how to achieve a better development of the financial industry and the increase of economic growth:to improve the environment of financial development in Shanghai,to accelerate the construction of capital market and improve the efficiency of financial system,Maintain the good development momentum of insurance industry, to strengthen its support functions,to boost financial innovation and expand the financial scale,to strengthen the cultivation of financial professionals and deepen the process of financial internationalization,to focus on the market feedback, thus accelerating the process of internationalization of RMB,promoting its financial label of Shanghai with the help of up coming World Expo.