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Financial Development and Economic Growth: Evidence from China in 1978-2009

Liu, Yichen LU (2011) EKHR22 20111
Department of Economic History
Abstract
This thesis examines the relationship between financial development and economic growth. By reviewing previous theories and empirical studies about financial development and economic growth and financial development process in China, I assumed that there is a positive relationship between financial development and economic growth in China case. Then I use time series annual data from 1978 to 2009 to set up a short-term model and long-term model. By running causality test and regression, I find that in the short term, if financial sectors in China develop well and provide more monetary services for economic activities, it will promote Chinese economic growth. At the same time, if Chinese economy develops very well, financial sectors will... (More)
This thesis examines the relationship between financial development and economic growth. By reviewing previous theories and empirical studies about financial development and economic growth and financial development process in China, I assumed that there is a positive relationship between financial development and economic growth in China case. Then I use time series annual data from 1978 to 2009 to set up a short-term model and long-term model. By running causality test and regression, I find that in the short term, if financial sectors in China develop well and provide more monetary services for economic activities, it will promote Chinese economic growth. At the same time, if Chinese economy develops very well, financial sectors will get benefit from the good economic environment. But if banks provide too much loan, the economic growth rate will slow down. In the long term, there is not really obvious positive effect between economic growth and financial development in China case as expected. But efficient bank loans are helpful for promoting economic growth. (Less)
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author
Liu, Yichen LU
supervisor
organization
course
EKHR22 20111
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Financial Development, Economic Growth, China, Time Series analysis
language
English
id
1977969
date added to LUP
2011-06-21 10:48:40
date last changed
2011-06-21 10:48:40
@misc{1977969,
  abstract     = {This thesis examines the relationship between financial development and economic growth. By reviewing previous theories and empirical studies about financial development and economic growth and financial development process in China, I assumed that there is a positive relationship between financial development and economic growth in China case. Then I use time series annual data from 1978 to 2009 to set up a short-term model and long-term model. By running causality test and regression, I find that in the short term, if financial sectors in China develop well and provide more monetary services for economic activities, it will promote Chinese economic growth. At the same time, if Chinese economy develops very well, financial sectors will get benefit from the good economic environment. But if banks provide too much loan, the economic growth rate will slow down. In the long term, there is not really obvious positive effect between economic growth and financial development in China case as expected. But efficient bank loans are helpful for promoting economic growth.},
  author       = {Liu, Yichen},
  keyword      = {Financial Development,Economic Growth,China,Time Series analysis},
  language     = {eng},
  note         = {Student Paper},
  title        = {Financial Development and Economic Growth: Evidence from China in 1978-2009},
  year         = {2011},
}