Financial Development and Economic Growth: An Analysis Based on Provincial Panel Data

This paper examines the causal relationship between financial development and economic growth for the case of China over the period 1978-2007. A panel data framework is used as an appropriate specification and the long-run relationship among financial development, growth and other key growth factors is analyzed in a theoretically based system. The empirical results show that there exists a unidirectional causality from financial development to economic growth in China, and financial development is found to lead and promote the economic growth. Conclusion give some policy suggestions.