A Reaserch On The Mutual Relationship Between Financial Innovation And Economic Growth Of China

Financial innovation is a double-edged sword, in order to make the development of economy in our country stable and healthy, the financial innovation will grasp the "degree" of the problem. As our country’s economy developing rapidly in recent years, if the financial innovation ability is insufficient, the degree of financial innovation is not good, it will not only influence the development of financial industry, but also will affect the development of the industry in our country. With the studying of the theroy about the financial innovation and financial development, the role of financial innovation to economic and financial innovation, then by collecting relevant data, this essay aim at working out the relationship between financial innovation and economic growth through the quantitative analysis. Finally try to find out the influence factors of the role of financial innovation, put forward reasonable policy suggestions in order to make the economy develop reasonably.First of all, the paper combs the definition of financial innovation, analysis the reason of its development and the economic effect. And introudce the relevant theories of economic growth that will be apply in the followed part.Secondly, analyze the interaction between financial innovation and economic growth in China through theoretical analysis, including the financial innovation’s direct and indirect effect on economic growth, economic growth on the threshold of the financial innovation effect and aggregation effect.Thirdly, making out a new IS-LM model by adding the financial innovation variable to correct the IS-LM model. Based on the corrected model, we can come to the conclusion that financial innovation can promote output growth. By using the neoclassical economic growth model, we know that the economic growth have certain effects on the development of financial innovation.Finally, through empirical analysis, find out that financial innovation and economic growth in China has strong causal relationship. In order to make the development of financial innovation in our country healthy, to ensure the stable operation of the economy, put forward the corresponding policy recommendations.