Research On The Relationship Between Financial Development And Economic Growth Based On VAR Model

The rapid development of the economy in any region can’t be separated from the support of the financial sector. Since the reform and opening-up, the economy and finance of China have made a rapid development, but the gap between the various regions is still great, this gap affects the further development of the entire national economy. What kind of role does the finance industry play in the process of economic development? Research and analyze the role of various departments in the financial market in the process of economic development can help us put forward the policy of financial development and economic development.This paper takes Anhui Province as an example, and based on Vector Auto Regressive Model of related indicators of financial development and economic growth in Anhui, has carried on the co-integration test and granger causality test. Research shows that there is a cause and effect relationship between financial development and economic growth. Through the Impulse Response Function to study the dynamic relationship between financial and economic growth, then through the Variance Decomposition to study various parts of the financial market’s contribution to the economic growth. Based on the test results, the paper analyzes the reasons.The problem studied in this paper is also existed in many less developed provinces. Therefore, based on the previous research conclusions, this paper puts forward the relevant countermeasures for the financial market to continue to provide power for economic growth.We should try best to develop diversified financial system, through this way to improve the efficiency of financial development; deepening the reform of insurance institutions and improve the management level of the insurance market; increasing the capital market reform, and try to improve the proportion of direct financing, the coordinated development of banking, insurance, securities.