Is Financial Repression Holding Back Economic Growth?

Economic growth is an important factor in relation to the economy and livelihood,and the impact of financial repression on economic growth is a matter of concern to the theoretical circle.Financial repression policies(including,but not limited to,lowering real interest rates,selective credit and restrictions on the development of financial institutions and products)have been extensively discussed in the economic literature.Theorists generally believe that the Government's measures to take financial repression are to obtain "rent" from the financial system or to manage public debt.The literature of the 1970s and 1980s more about the negative effects of financial disincentives on economic growth and financial market development in developing countries,but recent literature has focused on the adoption of financial repression policies by the state to obtain low-cost funds from financial markets in the wake of the global financial crisis.For the past 40 years,China has been pushing ahead with the process of financial liberalization.On the one hand,financial liberalization can make the flow of funds more free,conducive to the investment of resources into the most efficient projects,so as to promote economic development,on the other hand,it may also bring opportunities for capital speculation,resulting in the whole region's economic reality,in the long run is not conducive to the development of the real economy.This shortcoming has been evident in successive financial crises,particularly in the 2008 global financial crisis.China has made great progress in financial liberalization in recent years,but the lessons of the financial crisis cannot be ignored.How to achieve moderation in the elimination of financial repression,in the financial liberalization of neither harm the market-oriented allocation efficiency,but also to curb the speculative behavior of capital,to hold the bottom line without financial risks,is indeed a major issue in the face of China's economic development.The theoretical part of this paper first summarizes the previous literature,collates the relationship between economic growth and financial markets,and understands what the development of financial markets does to promote economic growth.This paper collates the relevant literature on financial repression,understands the main forms of financial repression and its impact on different aspects of the economy,and puts forward the hypothesis of the relationship between financial repression and economic growth.The empirical analysis part takes econometrics as the main tool,uses the quantitative analysis method,first carries on the descriptive statistics to the data,then by analyzing the correlation between the data,eliminates the excessive correlation data,avoids the multiple collinearity appearance,finally constructs the OLS,the CSW,the SUR and so on regression analysis,makes the corresponding explanation,and finally the robustness of the model is tested to ensure the credibility of the model.Finally,the empirical results of the model are summarized,the corresponding policy suggestions for economic development are put forward,and the further research is prospected.Based on this,this paper selects 31 provinces and cities in the country as the research object in 2004-2018 years,and a total of 465 samples in 15 studied the relationship between economic growth and financial repression.Through the study,it is hoped to solve the problem of whether financial disincentives have had a positive or negative impact on economic growth.The research shows that:(1)The bad loan rate of higher financial institutions has a significant negative impact on economic growth.(2)The increase in the proportion of deposits absorbed by non-large state-owned commercial banks is not necessarily conducive to economic development.(3)The increase in the proportion of financing,such as stock bonds,has a significant positive impact on economic development.This phenomenon is more prominent in the central and western regions,the eastern region is not significant.(4)The increase in the proportion of foreign direct investment is conducive to raising the level of economic development.(5)The decline in the level of government intervention in the market has had a significant positive impact on economic growth.Finally,according to the results of the study,this paper puts forward the following suggestions:(1)Financial institutions should strengthen the monitoring of non-performing loan ratios and maintain the non-performing loan ratio at a low level.Financial institutions use the non-performing loan ratio as the core of supervision and cooperate with other regulatory indicators to ensure the control of financial risks.(2)Reduce local protection in the banking sector and treat different subjects in the banking industry in the same way.(3)The whole country,especially the central and western regions,should encourage diversified financing methods and increase the share of bond equity financing.Regulators should improve the multi-level capital market,so that the issuance of stocks and bonds,transactions,exit have a sound regulatory guidance and supervision.(4)The national territory,especially the central and western regions,should appropriately relax the control of international capital and encourage foreign direct investment in China.(5)Reduce government intervention in the market and make the market a decisive force in the allocation of resources.We should speed up the reform of "putting pipe clothes",promote the functional transformation of "service-oriented government",and limit the direct intervention of government administrative actions on economic production.In the management of the industry,the government should make more reference to the opinions of experts and scholars,listen more to the voices of market subjects and reduce unnecessary barriers to the industry.We should strictly take control of administrative staffing,improve administrative efficiency,reduce the financial burden.