Financial Intermediation Development and Total Factor Productivity Growth: Evidence from Chinese Mainland Provincial Panel Data — Oak Academic Publishing
Research ArticleOpen AccessGoogle Scholar indexed
Financial Intermediation Development and Total Factor Productivity Growth: Evidence from Chinese Mainland Provincial Panel Data
Modern financial development theories suggest that, financial development can promote technological progress and long-term economic growth. Based on the Chinese mainland provincial panel data, the paper tests empirically the relationship between financial intermediation development and total factor productivity growth. In terms of the degree-of-freedom of bank loan decision-making, the ratio of loans of private enterprises and individuals to total loans is used to measure the development of Chinese financial intermediation. This paper finds that financial intermediation development significantly promotes total factor productivity growth when controlling for other variables, such as capital formation rate, foreign direct investment, government intervention and the urbanization level.
R. I. McKinnon, “Money and Capital in Economic Development,” The Brookings Institution, Washington, DC, 1973.
E. S. Shaw, “Financial Deepening in Economic Development,” Oxford University Press, New York, 1973.
R. Levine, “Financial Development and Economic Growth: Views and Agenda,” Journal of Economic Literature, Vol. 35, No. 2, 1997, pp. 688-726.
M. Pagano, “Financial Markets and Growth: An Overview,” European Economic Review, Vol. 37, No. 2-3, 1993, pp. 613-22. doi:10.1016/0014-2921(93)90051-B
G. Saint-Paul, “Technological Choice, Financial Markets and Economic Development,” European Economic Review, Vol. 36, No. 4, 1992, pp. 763-781. doi:10.1016/0014-2921(92)90056-3
J. Greenwood and J. Boyan, “Financial Development, Growth, and the Distribution of Income,” Journal of Political Economy, Vol. 98, No. 5, 1990, pp. 1076-1107. doi:10.1086/261720
P. Aghion and H. Peter, “Endogenous Growth Theory,” MIT Press, Cambridge, 1998.
R. G. King and R. Levine, “Finance and Growth: Schumpeter Might Be Right,” Quarterly Journal of Economics, Vol. 108, No. 3, 1993, pp. 717-737. doi:10.2307/2118406
A. De la Fuente and M. M. José, “Innovation, Bank Monitoring and Endogenous Financial Development”, Journal of Monetary Economics, Vol. 38, No. 2, 1996, pp. 269-301. doi:10.1016/S0304-3932(96)01277-9
K. Blackburn and V. T. Y. Hung, “A Theory of Growth, Financial Development and Trade,” Economica, Vol. 65, No. 257, 1998, pp. 107-124. doi:10.1111/1468-0335.00116
B. Thorsten, R. Levine and N. Loayza, “Finance and Sources of Growth,” Journal of Financial Economics, Vol. 58, No. 1-2, 2000, pp. 261-310. doi:10.1016/S0304-405X(00)00072-6
F. Rioja and N. Valev, “Finance and the Sources of Growth at Various Stages of Economic Development,” Economic Inquiry, Vol. 42, No. 1, 2004, pp. 27-40. doi:10.1093/ei/cbh049
S. Tadesse, “Financial Development and Technology,” Working Paper No. 879, William Davidson Institute, University of Michigan, Ann Arbor, 1997,
R. Inklaar and K. Michael, “Financial Dependence and Industry Growth in Europe: Better Banks and Higher Productivity,” Working Paper No. 100, Groningen Growth and Development Centre, University of Groningen, Groningen, 2008.
J. Zhang and J. Yu, “Analysis on Relationship of Deepening Financial Intermediation and Economic Growth in China,” Economic Research Journal, Vol. 40, No. 11, 2005, pp. 34-45.
J. Aziz and D. Christoph, “Growth-Financial Intermediation Nexus in China,” IMF Working Paper No. 02/194, International Monetary Fund, Washington, DC, 2002.
A. Guariglia, and P. Sandra, “Could Financial Distortions Be No Impediment to Economic Growth after All? Evidence from China,” Working Paper No. 06/36, Leverhulme Centre for Research on Globalization and Economic Policy, Nottingham, 2006,
N. R. Lardy, “China’s Unfinished Economic Revolution,” Brookings Institution Press, Washington, DC, 1998.
A. Park and S. Kaja, “Tests of Financial Intermediation and Banking Reform in China,” Journal of Comparative Economics, Vol. 29, No. 4, 2001, pp. 608-644. doi:10.1006/jcec.2001.1740
J. L. Du, L. Yi and Z. G. Tao, “Bank Loans and Trade Credit under China’s Financial Repression,” The China International Conference in Finance, Guangzhou, 7-10 July 2009.
H. Chen, “Development of Financial Intermediation and Economic Growth: The Chinese Experience,” China Economic Review, Vol. 17, No. 4, 2006, pp. 347-362. doi:10.1016/j.chieco.2006.01.001
Y. F. Lin and Z. Y. Li, “The Reform of State-Owned Enterprises and Financial Systems in China,” CCER Discussion Paper No. C2003027, Chinese Center of Economic Research, Peking University, Beijing, 2003.
G. Psacharopoulos and H. A. Patrinos, “Returns to Investment in Education: A Further Update,” Education Economics, Vol. 12, No. 2, 2004, pp. 111-134. doi:10.1080/0964529042000239140
X. X. Fu and L. X. Wu, “The Contributions of Total Factor Productivity to Chinese Regional Differences,” World Economy, Vol. 51, No. 9, 2006, pp. 12-22.
J. Zhang, G. Y. Wu and J. P. Zhang, “The Estimation of Chinese Provincial Physical Capital: 1952-2000,” Economic Research Journal, Vol. 32, No. 10, 2004, pp. 35- 44.
M. Tian, “Chinese Regional Income Gaps from the View of Total Factor Productivity,” Master’s Thesis, Tianjin University of Finance and Economics, Tianjin, 2007.
D. M. Drukker, “Testing for Serial Correlation in Linear Panel-Data Models,” The Stata Journal, Vol. 3, No. 2, 2003, pp. 168-177.
K.-Y. Tusi, “Economic Reform and Interprovincial Inequalities,” Journal of Development Economics, Vol. 50, No. 2, 1996, pp. 353-368. doi:10.1016/S0304-3878(96)00406-3
G. Boyreau-Debray, “Financial Intermediation and Growth: Chinese Style,” Policy Research Working Paper No. 3027, World Bank, Washington, DC, 2003.
R. Levine, N. Loayza and T. Beck, “Financial Intermediation and Growth: Causality and Causes,” Journal of Monetary Economics, Vol. 46, No. 1, 2000, pp. 31-77. doi:10.1016/S0304-3932(00)00017-9