The effect of financial deepening on regional economic growth

Author(s): Li Zhou

For a long time, the economic growth is influenced by financial system, and economists pay more and more attention to this effect. With China's reform and opening up and the establishment of socialist market economic system, the financial industry plays an increasingly important role in the national economy, which has become the core of modern economy. In this paper, we make an empirical test to analyze how the financial system will effect on the economic growth. The result shows that the financial development increased one percentage can drive economic growth increased by 0.942 percentages, so the effect of financial development to economic growth is obvious. From Johnson cointegration test, the result shows that there exist at least one direct co-integration relationship between financial development and economic growth, which means that there exist a long-term equilibrium relationship between financial development and economic growth

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