Research On Relationship Between Financial Development And Real Economy Base On Threshold Effect

The report of the 19 th National Congress of the Communist Party of China pointed out that in order to realize the construction of a modern economic system,it was necessary to focus on the development of the real economy.The country's social stability and healthy economic development are inseparable from the support of the real economy which is also the material basis for China's foothold in the world.However,since the 2008 economic crisis,the profits of China's financial industry has been going highly.On the contrary,the profits of related enterprises in the relevant real economy are gradually declining.Some industries with developed economies are even hollowed out.Studying the relationship between financial development and the real economy can understand whether China's financial development has squeezed the profits of the real economy,occupied the resources of the real economy development as well as correctly guides the development of the financial industry,so that it can play a role in promoting the development of the real economy.Based on the panel data of 17 provinces in 31 provinces from 2000 to 2016,this paper examines the development of finance and real economy and cites the classic Cobb-Douglas production function,constructing a threshold regression model to empirically examine financial development.The relationship between growth and real economic growth.The empirical results show that there is not a simple linear positive correlation but a nonlinear relationship between financial development and real economic growth in China.Financial development has a positive impact on real economic growth,when finance is low to the threshold of 0.148.Otherwise,it will hinder the entity.On this basis,31 provinces are divided into three parts: East,West and West,in order to measure the impact of financial development on regional real economic development.The result is that there is a significant single threshold effect in the east,with a threshold of 0.156;There are significant double threshold effects in the central and western regions,with threshold values of-0.072 and 0.074 in the central region and-0.082 and 0.051 in the western region.In addition,as a complementary informal mechanism,the Chinese government can formulate reasonable financial policies and maintain the stability of financial markets,by guiding financial institutions to avoid risks,providing financial support for more real economies that need support.Considering that the government plays an important role in the development of the real economy,this paper attempts to incorporate government expenditure into the threshold effect analysis system.The empirical results show that the impact of financial development on real economic growth is indeed closely related to the level of government expenditure.More specifically,under the conditions of high levels of government spending,raising the level of financial development is beneficial to the growth of the real economy,and vice versa.Finally,this paper proposes policy recommendations for financial coordination development and financial services of real economy in order to help finance promotion for real economy grow faster and better.