Financial Development and Economic Growth in Central Region of China: An Empirical Analysis

This paper investigates the causal relationship between financial development and economic growth in the central region of China for the period 1978 to 2007. A time-series approach using the VAR Model is used to provide evidence for the dynamic relationship. The empirical results provide clear support for the hypothesis that there is a stable long- run relationship between financial development and economic growth. Financial development causes economic growth in the central region. The results suggest that the financial development is important in the economic growth of the central region, financial intermediation reforms should be enhanced in order to promote its economic growth.