The Research On The Relationship Between Financial Development And Economic Growth Of Jiangxi Province

Economic growth is the necessary conditions to realize social progress, welfare increase and national political stability. Financial development has a positive role on economic growth; it is the core factor of modern economy. Gayle and Shaw (1955) emphasized financial factors in the economic development, and thought that the role of finance was to transform the citizens’savings into investment, thus effectively improved productive investment level of the whole society. Since the reform and opening up of China, the economic development of Jiangxi province has made a significant breakthrough, with growth rates continuing to keep high level, at the same time, the financial industry of Jiangxi province has also been fast development, with financial institutions becoming more diverse, and gradually forming a common good aspect of banking financial institutions as the main body, insurance, securities, trust, guarantee and financial companies, etc coordinated development, the total financial assets increased substantially, the financial structure performed more reasonable and optimization. So, was there a certain relationship between financial development and economic growth of Jiangxi province? Therefore, in this paper the author will make an empirical research on the relationship between financial development and economic growth of Jiangxi province, and put forward the corresponding policy recommendations.Firstly, on the basis of predecessors’achievements, using western mainstream financial development and economic growth theory as the guide and combining with the financial and economic development condition of Jiangxi province, the author discussed the research status about the relationship between financial development and economic growth at home and abroad, the formation, establishment and development of financial development theory, and the western mainstream economic growth theory.Secondly, the author depicted the present situation of financial development of Jiangxi province from the view of total finance, financial growth speed, the financial industry contribution and the financial structure, longitudinally analyzed the status of economic development of Jiangxi province, and also made a theoretical analysis of the correlation between financial development and economic growth of Jiangxi province.And then on the empirical part, the author made an empirical research on the relationship between financial development and economic growth of Jiangxi province by selecting the actual per capita GDP and the actual per capita GDP growth rate as economic growth index, and financial related rate, the efficiency of financial institutions, the amount of direct financing, and premium income as financial development indicators, and using cointegration test, error correction model and granger causality test. The author found that there was a cointegration relationship between financial development and economic growth of Jiangxi province, the actual per capita GDP growth and financial related rate existed positive correlation, but the actual per capita GDP growth and the efficiency of financial institutions existed negative correlation. Granger causality test showed that financial related rate (FIR) was the one-way granger reason of the actual per capita GDP growth rate (GRPGDP), it indicated that economic growth can be promoted by increasing the level of financialization of Jiangxi province, but the influence of economic growth to raise the level of financialization was relatively limited; the efficiency of financial institutions (FIE) was the one-way granger reason of actual per capita GDP growth rate (GRPGDP), it indicated that there was a certain degree of reverse inhibition of the efficiency of financial institutions on actual per capita GDP growth rate (Because the larger FIE value is, the lower the financial institution efficiency is), but the role of economic growth to enhance the efficiency of financial institutions was not significant. There was a cointegration relationship between actual per capita GDP and the amount of direct financing of Jiangxi province, and the actual per capita GDP will grow0.243%when the amount of direct financing increases1%. Granger causality test showed that the amount of direct financing was the one-way granger reason of the actual per capita GDP, this indicated that the level of economic development can increase the amount of direct financing, but the role of the amount of direct financing to promote economic growth was not significant, it was necessary to improve the direct financing channels of Jiangxi province. There was a cointegration relationship between the actual per capita GDP and premium income of Jiangxi province, and the actual per capita GDP will grow0.266%when premium income increases1%. Granger causality test showed that the actual per capita GDP was the one-way granger reason of premium income; this showed that the level of economic development can increase the premium income, but the role of premium income to promote economic growth was not significant, it is necessary to improve the insurance market of Jiangxi province.Finally, according to the empirical study results, the author presented policy recommendations to realize the coordinated development of finance and economic of Jiangxi province.