An Empirical Study on Causality between Financial Development and Economic Growth of Fujian Province

Abstract

Based on the depth, efficiency of financial development and the scale of securities market, through the Unit Root Test, Co-integration Test and Granger Causality Test methods, we analyzed the causality between financial development and economic growth of Fujian Province during the period from 1978 to 2008. We find out that there is a bidirectional causality between the depth of financial development and economic growth. The efficiency of financial development is the cause of economic growth, but economic growth has no effect on the efficiency of financial development. There is no Granger causality between securities market and economic growth. In the end, we give some policy advices so as to improve financial development and accelerate economic growth.