Empirical Research Of The Effect Of Rural Financial Development On Agricultural Economic Growth And Farmer’s Income Increasing

China is a large agricultural country, rural economic development and farmers’income will directly affect China’s overall economic development. However, in terms of the overall level of China’s rural economic development, it is still at a relatively low level of development, and the regional development is serious uneven. The rural economic development status restricts the rapid development of China’s economy. How to effectively promote rural economic growth and increasing farmers’income has become an important issue facing policy makers and scholars. Be sure, on the promotion of rural economic growth and farmers’income has been made a lot of research and constructive policy, but the impact of rural financial development on economic growth in rural areas and farmers’income increase is still one of the most concerned about the topic of domestic scholars. This is mainly because the finance is the core of the allocation of resources in modern economic development, the fist driving force of economic development, more developed financial system, more able to adapt and promote economic development. Rural finance as the core of the allocation of resources in rural areas, from the theoretical level, should be able to promote rural economic development issues, study this issue in depth will contribute to the formulation and implementation of macroeconomic policies.On the status of China’s rural financial development, although China’s rural financial system has undergone a series of market-oriented reforms, and achieved certain results, the farmers’problem of financing still not been resolved, existing financial situation is far from being able to meet the needs of farmers. In addition, the rural financial system has some shortcomings, such as reduced network of formal financial institutions in rural areas, the diversion of funds, the mechanism of competition is imperfect, financial product innovation lag, capital supply and demand imbalance, private lending activity, financial development retardation may become the bottleneck of financial support for agriculture. Thus, this paper gives the following questions:Does the current development of China’s rural financial affect rural economic growth and farmers’income? Is there a relationship between the lower level of development of China’s rural economy and our current lack of financial development in rural areas? To clarify the question has a positive policy reference for the formulation and implementation of national macro-control policies and financial policies.In view of this, we further explore the impact of China’s rural financial development on rural economic growth and increase in farmers’income basing on theoretical research between rural financial development and rural economic growth and between financial development in rural areas and farmers’income increase. To this end, we established a vector error correction model, and put rural financial, rural economic growth and farmers’income three key macro-financial variables in the same model to do some empirical study. This paper analyzed the effect of rural financial development on rural economy and farmers’income by measurement of the unit root test, co-integration test, Granger causality test, impulse response and variance decomposition analysis. The main conclusions are as follows. First, the co-integration test shows that there is a stable co-integration relationship between the three indicators of the rural financial development, economic growth in rural areas and farmers’income increase. This means that, in the long term, the common trend exists between the rural financial development, rural economic growth and raising farmers’income. Second, the Granger causality test shows that China’s rural financial development is not a rural economic growth Granger cause, while the development of rural finance is the Granger cause of farmers’income. That is rural financial development is the main driving force of farmers’income, but the rural financial development does not play a significant promotion on rural economic growth. Finally, the impulse response and variance decomposition also shows that China’s rural financial development significantly promoted the increase in farmers’income, but limited impact on rural economic growth. In summary, the development of rural finance promotes farmers’ income increase, but failed to become a strong pillar for promoting rural economic growth. The serious lag of financial development restricts the rural economic growth and increase in farmers’income. The conclusion of this paper is drawn from the analysis by putting three important variables into a unified analytical framework, so the conclusion is robust, meanwhile, making the interaction between the variables comparable.Finally, the paper gives the following policy recommendations:In order to promote rural economic development and increasing farmers’income should develop a wide range of financial structures to meet the diverse needs of farmers. Not only to the development of Agricultural Bank of China, agricultural development banks, rural credit cooperatives and other formal financial institutions, but also lead to promote the development of non-formal financial institutions, optimize the financial structure in rural areas, to build the perfect modern rural financial system. Some studies have shown that the presence of non-formal financial institutions, to some extent, could solve the problem of farmers’difficulty in obtaining loans. Meanwhile, the government should increase policy support to promote the development of rural financial.