IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v14y2022i15p9348-d876167.html
   My bibliography  Save this article

Analysis of the Relationships between Financial Development and Sustainable Economic Growth: Evidence from Chinese Cities

Author

Listed:
  • Chao Gao

    (College of Finance and Statistics, Hunan University, Changsha 410006, China)

  • Dequan Yao

    (College of Finance and Statistics, Hunan University, Changsha 410006, China)

  • Jiayu Fang

    (School of Economics and Management, Tsinghua University, Beijing 100084, China)

  • Zhengchu He

    (School of Business, Xiangtan University, Xiangtan 411105, China)

Abstract

At the stage of high-quality economic development, sustainable economic growth is worthy of attention. The supporting role of financial development for sustainable economic growth will become more important. This article aims to identify the influence of financial development on sustainable economic growth and its impact mechanism. Based on measuring the level of sustainable economic growth, this article theoretically and empirically identifies the impact of financial development on sustainable economic growth and its mechanism by adopting the panel data from 283 prefecture-level and above cities in China. The empirical results show that financial development is conducive to improving sustainable economic growth through the mechanism of capital deepening and technological innovation. Furthermore, for type I large and medium cities, financial development is conducive to enhancing sustainable economic growth, while the effect is not significant for type II large and small cities. Therefore, the local government could promote financial supply-side reform and implement differentiated financial development strategies for sustainable economic growth from aspects of capital deepening and technological innovation.

Suggested Citation

  • Chao Gao & Dequan Yao & Jiayu Fang & Zhengchu He, 2022. "Analysis of the Relationships between Financial Development and Sustainable Economic Growth: Evidence from Chinese Cities," Sustainability, MDPI, vol. 14(15), pages 1-15, July.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:15:p:9348-:d:876167
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/14/15/9348/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/14/15/9348/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Montfort Mlachila & René Tapsoba & Sampawende J. A. Tapsoba, 2017. "A Quality of Growth Index for Developing Countries: A Proposal," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 134(2), pages 675-710, November.
    2. Peter L. Rousseau & Paul Wachtel, 2011. "What Is Happening To The Impact Of Financial Deepening On Economic Growth?," Economic Inquiry, Western Economic Association International, vol. 49(1), pages 276-288, January.
    3. Reenu, 2008. "Role of Economic Reform in the Growth of Indian Economy," Journal of Commerce and Trade, Society for Advanced Management Studies, vol. 3(1), pages 19-22, April.
    4. De Gregorio, Jose & Guidotti, Pablo E., 1995. "Financial development and economic growth," World Development, Elsevier, vol. 23(3), pages 433-448, March.
    5. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    6. Tadesse, Solomon, 2002. "Financial Architecture and Economic Performance: International Evidence," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 429-454, October.
    7. Xiong, Ailun & Xia, Senmao & Ye, Zhen Peter & Cao, Dongmei & Jing, Yanguo & Li, Hongyi, 2020. "Can innovation really bring economic growth? The role of social filter in China," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 50-61.
    8. De Gregorio, Jose & Kim, Se-Jik, 2000. "Credit Markets with Differences in Abilities: Education, Distribution, and Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(3), pages 579-607, August.
    9. Martin, Ben R., 2012. "The evolution of science policy and innovation studies," Research Policy, Elsevier, vol. 41(7), pages 1219-1239.
    10. Greenwood, Jeremy & Jovanovic, Boyan, 1990. "Financial Development, Growth, and the Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 1076-1107, October.
    11. Akçomak, I. Semih & ter Weel, Bas, 2009. "Social capital, innovation and growth: Evidence from Europe," European Economic Review, Elsevier, vol. 53(5), pages 544-567, July.
    12. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 249-275.
    13. Paul J. J. Welfens, 2008. "ICT – productivity and economic growth in Europe," Springer Books, in: Paul J. J. Welfens & Ellen Walther-Klaus (ed.), Digital Excellence, pages 13-39, Springer.
    14. Han, Feng & Ke, Shanzi, 2016. "The effects of factor proximity and market potential on urban manufacturing output," China Economic Review, Elsevier, vol. 39(C), pages 31-45.
    15. Levine, Ross, 2005. "Finance and Growth: Theory and Evidence," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 12, pages 865-934, Elsevier.
    16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    17. Solomon Tadesse, 2005. "Financial Development and Technology," William Davidson Institute Working Papers Series wp749, William Davidson Institute at the University of Michigan.
    18. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
    19. Timmer, Marcel P. & Szirmai, Adam, 2000. "Productivity growth in Asian manufacturing: the structural bonus hypothesis examined," Structural Change and Economic Dynamics, Elsevier, vol. 11(4), pages 371-392, December.
    20. Benhabib, Jess & Spiegel, Mark M, 2000. "The Role of Financial Development in Growth and Investment," Journal of Economic Growth, Springer, vol. 5(4), pages 341-360, December.
    21. Pot, Felix Johan & Koster, Sierdjan, 2022. "Small airports: Runways to regional economic growth?," Journal of Transport Geography, Elsevier, vol. 98(C).
    22. Zhou, Bing & Zeng, Xiaoyan & Jiang, Lu & Xue, Bing, 2020. "High-quality Economic Growth under the Influence of Technological Innovation Preference in China: A Numerical Simulation from the Government Financial Perspective," Structural Change and Economic Dynamics, Elsevier, vol. 54(C), pages 163-172.
    23. de La Grandville, Olivier, 1989. "In Quest of the Slutsky Diamond," American Economic Review, American Economic Association, vol. 79(3), pages 468-481, June.
    24. Shen, Chung-Hua & Lee, Chien-Chiang, 2006. "Same Financial Development Yet Different Economic Growth: Why?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(7), pages 1907-1944, October.
    25. Tveter, Eivind, 2017. "The effect of airports on regional development: Evidence from the construction of regional airports in Norway," Research in Transportation Economics, Elsevier, vol. 63(C), pages 50-58.
    26. Nicholas Apergis & Ioannis Filippidis & Claire Economidou, 2007. "Financial Deepening and Economic Growth Linkages: A Panel Data Analysis," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 143(1), pages 179-198, April.
    27. Maskus, Keith E. & Neumann, Rebecca & Seidel, Tobias, 2012. "How national and international financial development affect industrial R&D," European Economic Review, Elsevier, vol. 56(1), pages 72-83.
    28. Dhakal, Shobhakar, 2009. "Urban energy use and carbon emissions from cities in China and policy implications," Energy Policy, Elsevier, vol. 37(11), pages 4208-4219, November.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhiqiang Zhou & Wenyan Liu & Pengfei Cheng & Zhenjin Li, 2022. "The Impact of the Digital Economy on Enterprise Sustainable Development and Its Spatial-Temporal Evolution: An Empirical Analysis Based on Urban Panel Data in China," Sustainability, MDPI, vol. 14(19), pages 1-23, September.
    2. Xiaohui Chen & Yiqing He, 2022. "The Impact of Financial Resilience and Steady Growth on High-Quality Economic Development—Based on a Heterogeneous Intermediary Effect Analysis," Sustainability, MDPI, vol. 14(22), pages 1-19, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alberto Bucci & Simone Marsiglio, 2019. "Financial development and economic growth: long‐run equilibrium and transitional dynamics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(3), pages 331-359, July.
    2. Richard E. Itaman, 2022. "The finance‐growth nexus enigma: Bringing in institutional context and the productiveness debate," Journal of Economic Surveys, Wiley Blackwell, vol. 36(2), pages 504-527, April.
    3. Samargandi, Nahla & Fidrmuc, Jan & Ghosh, Sugata, 2015. "Is the Relationship Between Financial Development and Economic Growth Monotonic? Evidence from a Sample of Middle-Income Countries," World Development, Elsevier, vol. 68(C), pages 66-81.
    4. James B. Ang, 2008. "A Survey Of Recent Developments In The Literature Of Finance And Growth," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 536-576, July.
    5. Muhammad Arshad Khan & Abdul Qayyum, 2006. "Trade Liberalisation, Financial Sector Reforms, and Growth," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(4), pages 711-731.
    6. Jean Arcand & Enrico Berkes & Ugo Panizza, 2015. "Too much finance?," Journal of Economic Growth, Springer, vol. 20(2), pages 105-148, June.
    7. Thorsten Beck, 2009. "The Econometrics of Finance and Growth," Palgrave Macmillan Books, in: Terence C. Mills & Kerry Patterson (ed.), Palgrave Handbook of Econometrics, chapter 25, pages 1180-1209, Palgrave Macmillan.
    8. Swamy, Vighneswara & Dharani, Munusamy, 2019. "The dynamics of finance-growth nexus in advanced economies," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 122-146.
    9. Herwartz, Helmut & Walle, Yabibal M., 2014. "Determinants of the link between financial and economic development: Evidence from a functional coefficient model," Economic Modelling, Elsevier, vol. 37(C), pages 417-427.
    10. Petra Valickova & Tomas Havranek & Roman Horvath, 2015. "Financial Development And Economic Growth: A Meta-Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 29(3), pages 506-526, July.
    11. Rosa Capolupo, 2018. "Finance, Investment and Growth: Evidence for Italy," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 47(1), pages 145-186, February.
    12. Michael Graff, 2005. "Is There an Optimum Level of Financial Activity?," KOF Working papers 05-106, KOF Swiss Economic Institute, ETH Zurich.
    13. Chu, Lan Khanh & Chu, Hung Viet, 2020. "Is too much liquidity harmful to economic growth?," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 230-242.
    14. Aqil Khan & Mumtaz Ahmed & Salma Bibi, 2019. "Financial development and economic growth nexus for Pakistan: a revisit using maximum entropy bootstrap approach," Empirical Economics, Springer, vol. 57(4), pages 1157-1169, October.
    15. Gründler, Klaus & Weitzel, Jan, 2013. "The financial sector and economic growth in a panel of countries," Discussion Paper Series 123, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    16. Beck, Thorsten & Degryse, Hans & Kneer, Christiane, 2014. "Is more finance better? Disentangling intermediation and size effects of financial systems," Journal of Financial Stability, Elsevier, vol. 10(C), pages 50-64.
    17. M. Kabir Hassan & Benito Sanchez & Jung-Suk Yu, 2011. "Financial Development and Economic Growth in the Organization of Islamic Conference Countries التطور المالي والنمو الاقتصادي في دول منظمة المؤتمر الإسلامي," Journal of King Abdulaziz University: Islamic Economics, King Abdulaziz University, Islamic Economics Institute., vol. 24(1), pages 145-172, January.
    18. Kirikkaleli, Dervis & Athari, Seyed Alireza, 2020. "Time-frequency co-movements between bank credit supply and economic growth in an emerging market: Does the bank ownership structure matter?," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    19. Manuel Ennes Ferreira & João Dias & Jelson Serafim, 2022. "Stock Market and Economic Growth: Evidence from Africa," Working Papers REM 2022/0228, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    20. Michael Adusei, 2013. "Financial Development and Economic Growth: Evidence from Ghana," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 7(5), pages 61-76.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:14:y:2022:i:15:p:9348-:d:876167. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.