Study Of The Relationship Between Financial Deepening And Economic Growth In Korea

From1970s, the financial deepening theory became popular around the world, manycountries have begun to implete financial liberalization policy. As the emerging countryin East Asian, South Korea joined the financial liberalization reform army in the earlyeighties. With the economy fly in Korea, the growth of finance deepening flys rapidly aswell. In the mean time, Korea experienced two financail crisis, the East Asian financialcrisis and the global financial crisis, both of them had huge impact on the Koreaneconomy which making scholars have to review the financial liberalization reform. Thisarticle reviews the financial liberalization process in South Korea, then did empiricalanalysis useing metric method according to Mackinnon ’s "economic growth andfinancial deepening interaction relations" theory. The empirical results shows thatcointegration test and Grainger causality test South Korean financial deepening andeconomic growth between the long-term stable positive correlation, through the Eviewsanalysis. The econometric analysis of time series data which uses the M2/GDP value asindicators of financial deepening, and uses GDP growth rates as indicators of economicgrowth. But in the short term, inconsistency speed level of the financial deepening andeconomic growth will cause the financial system vulnerable to financial crisis. Therefore,this paper holds the idea that the financial deepening should adopt to a gradual paceacording with economic growth, and synchronously, so as to achieve the aim ofpromoting economic growth.Through retrospecting and pondering South Korean financial reform, and get the ideathat it’s necessary to impelete gradual deepening financial reform and the key function offinancial innovations. And draw a conclution of financial reform experiences andenlightenment which are useful to China, on the one hand making good use of thegovernment ’s role, on the other hand accelerating financial innovation whilestrengthening the financial supervision, and then take a suitable way for China complywith the global trend.