Study on Financial Development Based on Dynamic Panel Data Model
We should take different regional economic and financial development consideration, when we analyze the effect of China’s financial development to promote economic growth. This paper analyzes the dynamic panel data model, and concludes that the financial
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Study on Financial Development Based on Dynamic Panel Data Model Huizhong Liu, Xue Tian, Xiaoyin Hou and Yuhang Li Abstract We should take different regional economic and financial development consideration, when we analyze the effect of China’s financial development to promote economic growth. This paper analyzes the dynamic panel data model, and concludes that the financial development has the vital simulation effect on economic growth, and the effect is obvious area differences: financial development promotes economic growth strong region in the east than in the central and western regions. Financial development, increase savings and investment, improve the investment efficiency, so as to effectively promote the economic growth.
Keywords Financial development • Economic growth • Dynamic panel data model
60.1 Introduction Among the factors affect economic growth, economic development by many scholars’ attention [1]. There are two kinds of different opinions played a role in the financial development is to promote economic growth [2]. Lucas representative viewpoint is not important financial development on the economic growth and economic growth brings demand, financial tools and financial services of financial development result. Instead, some economists such as gold and McKinnon, investment and financial development suggestion positively correlated, so the financial development is one of the factors affecting imports on the promoting effect of economic growth.
H. Liu (*) · X. Tian · X. Hou · Y. Li Wuhan University, Wuhan, Hubei, China e-mail: [email protected]
W. Du (ed.), Informatics and Management Science I, Lecture Notes in Electrical Engineering 204, DOI: 10.1007/978-1-4471-4802-9_60, © Springer-Verlag London 2013
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In recent years, more research shows that financial development did have an important effect on economic growth achieved through the following two mechanisms [3]. First of all, financial development can increase savings and investment for two reasons: (1) economic development of financial instruments, so as to enrich the more effective mobilizing saving, it can convert idle funds investment; (2) financial development can save transaction costs and information, so it to increase savings for investment. Second, the financial development can improve the efficiency of investment through the two aspects: (1) produce more of the material, with the development of financial investment decision, so as to improve the efficiency of capital allocation, promote economic growth; (2) can improve financial development of financial assets of liquidity, reduce the liquidity risk leading investors to short-term assets into a long period of low yield high yield, improve the fixed assets of the long-term equilibrium products. Economists on the analysis of the relationship between financial development and economic growth in the related theory, the corresponding empirical research are also increasing. The empirical research can be roughly divided into three stages, according to
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