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Financial Development and Economic Growth of

Abstract: The relationship between the financial and mainstream theories of economic growth are reviewed on the relationship between finance and economic growth in the Perspective of a summary, analysis of China's financial development and economic growth, relationships, and draw relevant policy conclusions . Keywords: financial development; economic growth; school; relationship; of

Finance is the core of modern economy. History has repeatedly proved that the world economic development, financial repression and financial excesses would damage economic growth. China's economy in transition period to achieve sustained, healthy and rapid development, must be able to correctly grasp the Financial Development and Economic Growth, to establish and adapt to rapid economic growth of the modern financial system, which not only relates to the financial system and the whole economic system the success or failure, but also to the smooth development of strategic objectives to achieve the third step. Therefore, from a theoretical and practical in-depth study of this issue is particularly important. Chinese papers League finishing. First, financial development and economic growth theory genre of classical economics,[link widoczny dla zalogowanych], from the early date, the Western financial and economic circles of the relationship between economic growth so far, three hundred years of history. In this long debate, there has been great concern two mechanisms: First, the mechanism of money on economic growth: the second is the impact of financial intermediaries and financial markets, the mechanism of economic growth. According to the mechanism of the two different interpretations, in general, can the relationship between finance and economic growth,[link widoczny dla zalogowanych], independent schools are divided into financial theory and financial dependent on the financial promotion of three. Independent of the financial and economic growth. Classical economists and the real economy of financial relations between the monetary variables and the abstract into the relationship between the real variables to form the Western Economics On this basis, Zaire, currency neutral theory proposed, emphasizing the changes in the quantity of money causes the price level will increase or decrease the proportion of production and supply, real output and employment do not have a material impact, that money is the veil of the real economy. Neoclassical school of economics that money is just the lubricant of economic operation. Makes the exchange of goods easier and smoother, while the real economy does not materially impact of the variable. Friedman School of representative money, money demand function is extremely stable in the short term because of adaptive expectations, changes in money supply can affect output and prices; but in the long term, output from labor and capital and technical and other non-monetary factors, money supply determine the price level only. Rational expectations school of thought believes that only an unexpected short-term currency movements can affect real variables. In the long run, monetary policy is predictable, currency movements would lead to a corresponding change in the price level, while no effect on real output and employment. Although the school of rational expectations to some extent, negate the Of finance to promote economic growth. The currency in circulation to promote the economic growth discussion of the role that can be traced back to the originator of Adam Smith economics. He believes that prudent business activities can enhance a country's industry, but the way the industry is not promoting one country to promote the capital, but that the majority of the capital with nothing useful, most of the capital is not earning a profit. Swedish economist Weike Sale back in the late 19th century to recognize the deficiencies of the classical monetary neutrality, pointing out that under the conditions in the credit system, currency plays an active role in economic activities. Only in the currency interest rate equal to the natural rate of interest, the general price level steady state, money is neutral. Credit creation from the perspective of Schumpeter highlighted the banking system, a powerful driving force for economic development. He believes that the essence of economic development is innovation,[link widoczny dla zalogowanych], and functioning of the bank can be screened for entrepreneurs, to provide financial support for innovative activities. 30 years of the 20th century, John Maynard Keynes pointed out that the uncertainty of the future of the main features of the monetary economy, through the induction of the interest rate on investment, money can affect the output level of national income. Keynes also adopted the aggregate analysis, the real economy and monetary economic theory combined classical economics to overcome the 50 years of the 20th century, John Gurley and Edward Shaw described the financial intermediation of an investment in saving an important role in the transformation mechanism, opened the curtain of financial theory. Since then, financial factors are increasingly attention in economic theory, and highlights as the same land, capital and labor equally important factor of economic growth. In 1969, the founder of modern comparative finance Goldsmith pointed out that the primary form of securities and subordinated securities to accelerate the financial superstructure of economic growth,[link widoczny dla zalogowanych], improved economic performance, for the transfer of funds to provide the best user in the hands convenient. 70 years of the 20th century, Edward Shaw, and Ronald McKinnon of financial deepening, respectively, the analysis of financial repression, the monetary and non-monetary assets, bank and non-bank financial institutions unify describes a country's financial system and the mutual stimulation between economic development and mutual checks and balances. After Kapoor and others to McKinnon and Shaw developed into a dynamic analysis of static analysis, and further clarified the financial deepening in developing countries an important role in economic development. Since the 20th century,[link widoczny dla zalogowanych], the rise of 90 finance theory emphasizes the endogenous capital efficiency improvements due to financial intermediaries and financial markets in the allocation of capital to the best possible use of the key role played on. Economic growth of the financial subordinate. Some economists argue that financial development on the real economy, the role is very limited, financial development is a result of economic growth. Joan Robinson against the Schumpeter industries on the financial sector to guide and stimulate technological innovation and entrepreneurial behavior thesis, emphasizing economic development as a particular form of financial arrangement created a demand, and the financial system is to respond to these needs, the financial system, thereby denying the positive role on economic growth. Dornbusch believes that the financial savings and real interest rates are not related.
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