Study On The Dynamic Relationship Of Financial Development,Financial Stability And Economic Growth

The interaction between financial development and economic growth has been a hot topic among scholars, but few scholars have discussed the relationship among financial development, financial stability and economic growth. Since the last century, the financial crisis continued to erupt, and the risk of financial system continued to increase, which also brought a great negative impact on economic growth. The government, financial institutions, and scholars have to re-examine the financial stability factor. Therefore, the importance of exploring the relationship of financial development, financial stability and economic growth is that theoretical reference value and practical significance for the future of our country about control policy choice, macro-prudential regulation improvement, financial development speed control and macroeconomic regulation.To begin with, this paper selects based indicators from two aspects of the financial system stable operation and resists external risk ability based on A guides of Financial Soundness index’s building published by IMF. This paper construct financial stability index for Chines economy by principal component analysis method. The results showed that the Chinese financial system is stable by a weak fluctuation. Secondly this paper researches the relationship of financial development, financial stability and economic growth by the model of TVP-SV-VAR; and then analysis their relationship make use of the point of time impulse function and interval impulse function. The paper obtains the these conclusions. As following: first of all, the financial development promotes economic growth. But the financial development inhibited the economic growth in 2007.Second, in the short term, financial development has a small influence on financial stability. And the degree of the influence is relatively stable. In the long term, the positive impact that financial development effects on financial stability has some structural changes. The financial development plays a positive role for financial stability in 2010 years ago; but then, financial development plays a negative role. Third, financial stability has promoting effect on financial development. In the short term, financial stability has very weak positive impact on financial development; but with the lag periods longer, the promoting effect becomes more obvious. Fourth, the financial stability has a positive impact on economic growth which lags in different periods. And with lag periods increasing, the effect becomes more obvious. It shows that financial stability has a delay impact on economic growth.