Financial Developement and Economic Growth
|School||Huazhong University of Science and Technology|
|Keywords||Financial Depression Financial Deepening cointegration Test Financae Negative to Economy|
Discussion about the relationship between the financial development and economic growth has been continuous, because the right realization of the relationship is the foundation for making the financial development policy. By analyzing the five provinces in central China, we draw out the fastest-developing Hubei province and the slowest-developing Jiangxi province. The kernel variables about the finance and the economy are compared in order to find out the difference.Although the GDP per capita、capital investment、foreign trade in the two provinces have been developing fast, the economic development start point and the development style are different. The advantage in capital investment and foreign trade of Hubei in the initial stage of reforming and opening has been offset by Jiangxi. But Hubei is still No.1in the per capita GDP in the central five provinces. In financial development, Hubei’s degree of financial deepening is higher than Jiangxi. Hubei substantially precedes in the development index in bank、securities and insurance industry. In conclusion, Hubei is better than Jiangxi in the financial and economic development.On the basis of the two-sector model of finance and real economy, we add up the foreign trade variable. Using the1978-2010year data, we study the relationship among the per capita GDP, capital investment, financial interrelations ratio, the total import and export, by the Johansen cointegration test. The result shows that there are cointegration relationship in both Hubei and Jiangxi province. There are positive correlation between the financial interrelation ratio and the per capital GDP in Jiangxi province,while negative correlation in Hubei province. The result differs from the the empirical conclusion.We apply the theory of financial repression and the theory of financial deepening to explaining the result and making some suggestions. In order to realize the positive and interactive development of finance and economy, Hubei should not only emphasize on the financial development scale,but also relax the financial regulation appropriately, promote the competition of financial institutions, guide the development of Non-government finance, expand financial support for small and medium-sized enterprises.