Research On The Relationship Between Financial Development And Economic Growth In Heilongjiang Province

In a world led by a few developed nations, most of the economies run under the market economy system. And finance is the central element of modern market economy, economic development of every country and region all rely on advancement of its financial industry. When it develops slowly, even distortedly develops, it will have a negative impact on its economy. Heilongjiang Province is located in the northern region of northeast China. For a long time, economic development of northeastern areas lags far behind southeastern areas. Although the government has adopted the policy of revitalizing the old industrial bases in northeast region, the speed of economic growth in northeastern areas is still much lower than that of southeastern regions and the pace of financial advancement remains slow as well. Through researching on the relationship between financial development and economic growth in Heilongjiang Province, this paper aims to explore a road to financial reform which matches with this region.Firstly, this paper refers to theories on financial development and economic growth from experts at home and abroad, and then summarizes and classifies the above theories. Through analyzing the aggregate amount and structure of economic growth and financial advancement since the reform and opening up, the paper has pointed out some problems existing in financial industry of Heilongjiang Province. Secondly, after establishing the related index system, this paper utilizes related economic and financial data in this areas ranging from 1993 to 2009 to conduct ADF unit root test, Johansen-Juselius cointegration test. Then the paper establishes Vector Auto-Regression model, and uses Impulse Response Function and Variance Decomposition to explore the interaction between economic growth and financial development in Heilongjiang Province. In order to ensure the results fully convinced technically, this paper utilizes Granger causality test to verify the relationship between them. Lastly, based on the conclusions of empirical research, the author proposes six advice to the local government and financial administration authority, say, enhancing efficiency of financial system, increasing credit amount to private sector, and maintaining the rapid development of insurance market, etc.