What is the relationship between financial development and economic growth?

Abstract

This paper aims to explore the relationship between financial development and economic growth in China over 10-year period, which is from 2008 to 2018. The preliminary result indicates that there is a positive relationship between financial development and economic growth. They both contribute to the prosperity of the other. In order to make the result more robust, we also include time-series analysis of other development and developed countries. They all show the similar pattern. Another important finding of the research is that private factor tends to be difficult to finance enough money to develop, therefore government can make some new regulations to encourage credit flow more to the private sector or allocate more tax revenue to help private sector.