The Study Of The Relationship Between Financial Efficiency And Economic Growth In Shanxi

Since China’s reform and opening up, Chinese economy has made remarkableachievements. Finance as the core of modern economy, has gradually become thedominant force to promote the economic growth. Because the start of China’s financialdevelopment is relatively late, the financial system still has many problems in theprocess of growing. So, more and more scholars began to realize the expanding offinancial scale must be restricted because of the scarcity of financial resource. Lowfinancial efficiency has become the main obstacle to financial development in the future.When study the relationship between financial efficiency and economic growth, manyscholars often examine the effect on economic growth from financial scale but notfinancial efficiency, especially the relationship between regional financial efficiencyand regional economic growth is not very mature. However, Shanxi Province is locatedin the centre of China, no matter the development of economic or development offinance, it is still relatively backward. Because of the unique geographical environment,the economic development of Shanxi Province is special either. So, study the interactionof financial efficiency and economic growth in Shanxi Province has its importanttheoretical meaning and practical meaning.This article has five chapters, mainly divided into three parts:The first part includes the first three chapters, mainly summarizes some theoreticalresearch about the relationship between financial efficiency and economic growth putforward by domestic and overseas scholars. Meanwhile, we summarize their standpointof financial efficiency and make sure the function of financial efficiency to promote thegrowth of the modern economy. Chapter3gives a definition of financial efficiency. Onthe basis of exiting domestic evaluation system, this paper constructs a series ofevaluation index system of financial efficiency based on the practice of Shanxi Province,and use factor analysis to fully analyze the current situation about financial efficiency ofShanxi. The results show that the financial efficiency of Shanxi Province has a strengthened trend as a whole, but it has a slightly drop because of sustained reduce ofefficiency of conversion from investment to GDPThe second part is chapter4, mainly uses1993-2012data which are related tofinancial efficiency of Shanxi Province, and uses VAR model to research the mutualrelationship between financial efficiency and economic growth. The empirical resultsshow that there is a co-integration relationship between financial efficiency andeconomic growth of Shanxi Province. And the three factors of financial efficiency reallyare granger causes of economic growth. In turn, economic growth may reinforce thesavings mobilization capability of financial system. The results of impulsive effect andvariance decomposition show that the efficiency of savings mobilization and efficiencyof conversion from saving to investment both can promote economic growth in a shorttime, but the efficiency of conversion from investment to GDP may restrain theeconomic growth. In the long term, the function of these three factors is not verysignificant.The third part is chapter5, mainly presents a series of suggestions to solve theproblems of financial efficiency existing in Shanxi Province. Suggestions such as:Optimize the economic structure and perfect social security system to take advantage ofsavings mobilization; improve the financial market system, promote the reform offinancial institutions and improve the financial ecological environment to strengthen theefficiency of conversion from saving to investment; deepen the reform of state-ownedenterprises to improve the efficiency of conversion from investment to GDP. Fromthese three aspects to comprehensive promote the financial efficiency of Shanxi, andstrengthen the support function of finance to economic growth in Shanxi Province.