Financial Development And Economic Fluctuation In China

Since the founding of New China, there have been several large economicfluctuations, but after90years the economy has showed high steady trend. Manyscholars believe that changes in the industrial structure, deregulation, increasedinternational openness, global context factors such as the relative stability of this changehas led to it. However, with further research, degree of financial development oneconomic fluctuations attracts more and more attention. Overview the domestic research, the relationship between financial development and economic fluctuations has notformed a unanimous conclusion. In the design of various institutional, financial reformhas a close relationship with the development of the financial, and the studies aboutfinancial system reform and economic fluctuation are relatively few. China is in acritical period of economic restructuring, the smoothly of the financial system andfinancial system reform play an important role in our country’s economy structureadjustment and the stable development of economy. In this theoretical assumption, byconstructing a model, based on Chinese-style decentralization tested under the financialdevelopment and the relationship between economic fluctuations and conductedrobustness test, this paper put forward policy recommendations.From the theoretical analysis, financial development can cripple the excessiveintervention of local governments, and smooth economic fluctuations in the followingaspects. Firstly, the higher the degree of financial development, the more you canweaken financial accelerator effect due to intervention by the local government.Secondly, the higher the degree of financial development, the more you can makelong-term investments of counter-cyclical, resist the irrational, excessive investment oflocal governments. Third, the higher the degree of financial development, the more youcan optimize the investment structure, increase total factor productivity growth, changethe "extensive" growth caused by local government intervention in the economy. Fourth,the higher the degree of financial development, the more you can improve credit market,meet different needs, and weaken the unbalanced industry or business developmentcaused by excessive government intervention. Fifth, the financial requirements of thedevelopment of the market, liberalization with local government intervention in theallocation of resources is difficult to effectively match. This article is based on theabove theoretical basis for an empirical study. Finally, test the robustness of the model,further evidence of the validity of the model.On the terms of empirical analysis, we should clarify the Chinese-style impact offiscal decentralization, and research the relationship between economic fluctuations andfinancial development in this context. The article select1988-2011Provincial PanelData, construct regression model. In the fiscal decentralization, I test the relationshipbetween financial development and economic fluctuation. Selection of indicators offinancial development, respectively, from the perspective of the scale and efficiency oftwo analyzes. Chinese-style separation of powers arising under the local government’sintervention to use local government expenditure/local government revenue represents. Fluctuations in the economy in order to more accurately measure the expression onvolatility, using five-year moving average of the standard deviation. Through eachvariable unit root test, using the F test, Hausman test to determine the form of the model,empirical results obtained. Through the residuals unit tests prove the explanatoryvariables and the explanatory variables exists long-term stable equilibrium relationship.Through empirical test, we found that the degree of financial development and percapita real GDP growth volatility relationship was not significant. Local governmentintervention impact on economic stability has played a role. Financial development canreduce the volatility of real GDP per capita growth rate of the sensitivity of localgovernment intervention. The role of financial development efficiency which is moresignificantOf course this article also has many deficiencies. One of the most primary problemsis the criterion for measuring the degree of fiscal decentralization. Due to the largerregional difference, it is difficult to fully express the influence of the separation ofpowers with a single index. More accurate and systematic study is needed. Second, theinteraction mechanism among them needs a more solid theoretical derivation as support.