An Empirical Analysis on the Relationship between Financial Deepening and Economic Growth during China's Transitional Period

This paper applies Granger causality test and co-integration analytical tools to investigate the relationship between economic growth and financial deepening of China in the period of 1978-2004.The conclusion indicates that the relationship between them keeps steady in the long run.The Granger causality test shows that there is mutual causality between economic growth and finial deepening.So we must strengthen the efficiency of financial deepening in the strategy of economic growth.Also,the analytical tool of classification shows that financial deepening of China can be divided into two stages by 1991.In the first period,economic growth dominates financial deepening and in the second period,financial deepening dominates economic growth.