Research On The Relationship Between The Banking Sector,the Stock Market And Economic Growth

Economic financializationis the significant feature of the modern market economy. The financehas great advantages in aspects such as resource allocation, risk management, information. the financial system has become the core of modern economy, and it is an important driving force of economic development. As two important parts of the financial system in China, the banking sector and the stock market are two most important channelsfor our financial system to act on our country economy. So it is necessary to research the relationship between the development of our banking sector,the development of ourstock market and our economic growth.Finally, we can give some suggestionfor how to coordinate the development of the banking sector and the stock market, optimize the financial structure and perfect the financial system, so that we can promote economic development fastly.In this paper, First we overview of relevant literatures both at home and abroad, followed by theoretical analysis, which elaborated in detail the basic principle of the interaction of the bank sector development and theeconomic growth and that of the interaction of the stock market development and the economic growth,and that of the interaction of the bank and the stock market, then the empirical analysis on the three bodies’relationship with the economic quantitative methods,mainly using Unit root test, Granger Causality tests, Co-integration test, Error correction model, Finally the summary ofthe empirical Analysis results, and its briefunderlying reasons, and some recommendations for the development ofboth the bank and the stock market in China. We choose data (f1992to2013) from the database of the world Bank toresearch the relationship between our banking sector, stock market development and economic growth, using the method of unit root test, granger causality test, co-integration test, vector error correction model methods.The results show that:in the long run, the index which reflecting banking development is positively related to the index which reflecting economic growth; In the long run, the index which reflectingthe development of stock market have apositive correlation with the index which reflecting economic growth. In the short term, the index which reflecting banking sector development, the index which reflecting the stock market development all have impact on fluctuation of the index which reflecting economic growth. The fluctuation of the index which reflecting economic growth also have a impact on the index which reflecting banking sector development, the index which reflectingthe developmentof stock market.Finally, we put forward the corresponding recommendations:We should strive to developsmall and medium-sized financial institutions, dissolve the risk of small and medium-sized financial institutions,improve the small and medium-sized enterprise financing credit guarantee system. We should perfect the mechanism of stock market for promoting high quality enterprises to enter the market, expand the stock market transparency, reduce the risk of investors,accelerate the process of companies establishing modern enterprise system. We should coordinate to deal with the relationship between the banking sector development and the stock market development, promote the coordinated development of the stock market and banking sector.This study tried to be perfect and reasonable, but for the limited research level, and some restrictions on the choice of variables and time span,and there are not enough comprehensive analysis and recommendations in conclusion, there is still room for further discussion.