Literature Review and Future Prospect on Financial Development and Economic Growth

Research on the relationship between financial development and economic growth has been a hot topic in academia. This article sums up some viewpoints of the most influential Western mainstream economists in this field,with a focus on four aspects. First,the theoretical literature summary focuses on the transmission mechanism,the perspective of financial structure and the factors affecting financial development. Second,it studies the causal relationship between financial development and economic growth. Third,it involves the research on a nonlinear relationship between the two studies. Fourth,it summarizes the empirical method,compares the advantages and disadvantages of using panel data and time series data,and points out that empirical analysis using time series data has the advantage in testing causal relationship,but with small sample biased defects and the empirical analysis of panel data can well overcome the endogeneity problems. Through the literature review,it will be of help to grasp the future direction of research in this field.