Financial Development, Capital Accumulation and Productivity Improvement: Evidence from China
AbstractFinancial sector development may contribute to economic growth by facilitating capital accumulation and by improving productivity. This article investigates empirically the contribution that financial development may make to these two alternative drivers of economic growth in China using annual data for the period 1952 to 2005. Using cointegration and Granger-causality testing we examine the relationship between financial development and, respectively, capital accumulation and productivity in a time-series vector autoregression (VAR) framework. The substantive findings are that there is either bi-directional Granger causality between financial development and capital accumulation or that Granger causality runs from capital accumulation to financial development, depending on how capital accumulation and financial development are measured. The link between financial development and productivity is found to be statistically weak.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal Journal of Chinese Economic and Business Studies.
Volume (Year): 5 (2007)
Issue (Month): 3 ()
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Other versions of this item:
- Xun Lu & Dietrich Fausten & Russell Smyth, 2006. "Financial Development, Capital Accumulation And Productivity Improvement: Evidence From China," Development Research Unit Working Paper Series 04/06, Monash University, Department of Economics.
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