Empirical Analysis on the Relationship Between Financial Development and Economic Growth of Shandong Province
|School||Liaoning Technical University|
|Keywords||financial development economic growth VAR model VEC model Granger Causality Test|
This paper mainly applies VAR and VEC models to the financial development analysis of Shandong Province which based on the economic and financial development theories. Firstly, it makes analysis on the relation between financial development and the economic growing transmission channel of capital stock, labor input and technological progress of Shandong Province. The research chooses data from 1978 to 2009 to make Unit Root Test, Johansen Cointegration Test and Granger Causality Test and gain the following conclusions. The capital stock is the transmission channel through which the financial development impact on the economic growth, but the reduction on marginal productivity of capital that caused by the conversion from savings to investment slows down the economic growth. The human capital also is the transmission channel to impact the economic growth, but the low efficiency of resource allocation of financial development makes increase in investment conversion rate and unemployment at the same time. Meanwhile, the financial development efficiency has negative correlation with the per capita output which means that the quality of labor input is too low. And the technological progress is proved not to be the channel that the financial development impacts on the economic growth.Secondly, the paper makes direct regression analysis on the relationship of financial development and economic growth taking the other control variables into account. And then, the research applies Impulse Response Function and Variance Decomposition Idea to the Dynamic Test of the regression analysis, which certifies the long-term Equilibrium relationship between the financial development and economic growth of Shandong Province. It finds that the conversation from savings to investment has cyclical influence on the total output, and the capital stock has negative correlation with the total output which has not significant coefficient. The labor input makes the biggest contribution to the total output, but it still exist the character of extensive economy.Finally, the paper proposes some recommendations on the policy. The capital transmission channel of financial development in Shandong Province should be improved first. And it will be followed by the promotion of labor input channel to increase the economy. Then the perfect transmission channel for technological progress will be necessary. Above all, it is the most imperative to accelerate the conversation of economic growing pattern, and create a favorable macroeconomic environment for the financial development of Shandong.