The Research On The Influence Of The Rural Finance Development To Rural Residents’ Consumption

Rural residents’ level of consumption is relatively low in China and ruralresidents are cautious with consumption. However, the potential demand ofconsumption of rural residents is tremendous. It is the inherent requirement ofexpanding domestic demand and transforming the pattern of economic development toimprove rural resident’s consumption. As the core of modern economy, finance playsan important role in promoting consumption. Thus the development of rural finance isof practical significance to the improvement of rural residents’ consumption.Based on the theory of consumption and financial development, this paperanalyzes factors that influence consumption. Two aspects are adopted to explore theinfluence mechanisms of the rural financial development.On the one hand, thedevelopment of rural finance can promote consumption directly through thedevelopment of rural consumer credit. On the other hand, the development of ruralfinance can enhance the rural residents’ income level, improve the rural consumptionenvironment and reduce the precautionary saving, affecting the rural residents’consumption indirectly.On this basis, the paper establishes vector auto regressive model, and buildsvector error correction model based on the VAR model.Through granger causality test,impulse response function and variance decomposition, it analyzes the long-termstability relationship, short-term dynamic relationship and causal relationshipbetween the rural financial development and rural residents’ consumption. The resultsshow that the increase of rural residents’ net income, the development of rural financeand the improvement of the rural environment are the granger causes of the increaseof rural residents’ consumption. In addition, the role of rural residents’ net incomeplaying on affecting the rural residents’ consumption is of most significance. Whilethat of rural financial development is rather weak,This shows that the level of ruralfinancial development is relatively low. But it’s worth noticing that the rural financialdevelopment has68%of the variance contribution rate to rural residents’ consumption,therefore the rural financial development plays an important role in promoting ruralresidents’ consumption.According to the theoretical and empirical research conclusion, this paperproposes the policy recommendations for stimulating rural residents’ consumption from four aspects, namely, by developing the rural consumer credit to promoteconsumption advance, by improving rural residents’ income to improve the ability ofconsumption, by strengthening the construction of rural infrastructure to optimize theenvironment of consumption and by promoting of rural insurance to releaseconsumption potential.