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 paper investigates empirically the contribution that financial development may make to these two alternative drivers of economic growth in China. Specifically, we construct a set of instruments for measuring financial development by using annual data from 1952 to 1999. 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 in China financial development contributes to economic growth primarily through facilitating capital accumulation, while the linkage between financial development and productivity improvement is statistically weak.
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Bibliographic InfoPaper provided by Monash University, Department of Economics in its series Monash Economics Working Papers with number 04/06.
Length: 24 pages
Date of creation: 02 Mar 2006
Date of revision:
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Postal: Department of Economics, Monash University, Victoria 3800, Australia
Web page: http://www.buseco.monash.edu.au/eco/
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Other versions of this item:
- Xun Lu & Dietrich Fausten & Russell Smyth, 2007. "Financial Development, Capital Accumulation and Productivity Improvement: Evidence from China," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 5(3), pages 227-242.
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