Financial Development And Economic Growth

Finance is the core of modern economy, which has a long history of the relationship between financial development and economic growth. Scholars have two views about the relationship between financial development and economic growth. The first view is that the financial development and economic growth are closely related. A developed financial system can promote capital formation, scientific and technological innovation, so as to speed up the economic growth, and economic growth, in turn, will increase the demand for financial services to promote financial development; another view thinks there is no correlation between the financial and economic growth. Despite there is a debate about the relationship in academia, but the policy is generally accepted that financial development has great promoting effect on economic growth and considered financial development as the main power to promote the growth of economic factor.Northeast China with its rich natural resources and the advantages of geographic location got rapid development at the beginning of the founding of China, which industrial development level has been at the leading place. But after the reform and opening up, the economic development of its has lagged behind the Pearl River delta and Yangtze River delta and other developed regions because of a series of reasons, such as historical factors and the policy. In2003the government put forward "revitalization of the northeast old industrial base" which gives more convenience to northeast China, so that the northeast area economy development restores vitality, industry upgrade speeds up, the social resources allocation efficiency improves obviously, and the speed of economic grows fast. Liaoning province with its unique geographical advantage and abundant industry foundation is to be the leader in northeast three provinces in economy. How to seize the historical opportunity, promote the economic development in Liaoning province is becoming a hot spot of many scholars study. Financial industry occupies the core position in the modern economic life. A perfect financial system is benefit for strengthening risk management, reducing information cost and improving the efficiency of the allocation of resources to promote economic growth. In recent years, the rapid economic development of Liaoning province, however, there are many drawbacks, such as bank credit mainly to the low efficiency of enterprises, the same time, state-owned enterprises, and good benefits, create jobs more small and medium-sized enterprises have high cost of financing, financing time is long, and low credit line. In regional scale, what is the relationship between financial development and economic growth of Liaoning province? Financial development is strong support for the economic growth; economic growth is, in turn, promoting the financial development. This article analyzes the relationship between financial development and economic growth in Liaoning province so as to put forward some suggestions for the sustainable development of economy in Liaoning province.This article includes five parts. The first part is introduction, which mainly introduces the topic background and research significance; and then introduces the domestic scholar’s research methods and research results; finally, briefly introduces the frame structure of this paper.The second part introduces the theories of economic growth and financial development. First according to the historical development stage introduces the evolution and the development of the theories of economic growth, and then analyzes the principle of the mechanism of financial development promote economic growth, and finally from the perspective of realistic significance to interpret the effect of financial development to economic growth.The third part is about the present situation of financial development in Liaoning province and a brief analysis of the status quo of the economic growth. First from the banking, securities and insurance three aspects analyzes the present situation of financial development in Liaoning province, and then from the economic aggregate, industrial structure and social fixed investment briefly analyzes the level of economic development in Liaoning province.The fourth part is the core part of this article. Firstly, select the GDP per capita, the whole social fixed assets investment and import and export trade as the representative indicators of economic development in Liaoning province, also select investment conversion rate, degree of financial development as the representative indicators of financial development. To economic growth and financial development indicators do granger causality test, analysis the granger causality relationship between indicators, and according to the result of granger causality test of constructing simultaneous equations. The use of simultaneous equations to simulate empirical relationship between financial development and economic growth in Liaoning province. The empirical results show that between financial development and economic growth of Liaoning province presents a significant statistical relationship.The fifth part is the conclusion and the policy recommendations. On one hand, summarize the conclusion of the content; on the other hand, put forward relevant policy suggestions of financial development in Liaoning province. From the four aspects of promoting the development of securities market, speeding up financial innovation and financial regulation and supervision, and strengthening the rural financial development gives some suggestions.