Study of the Impact of Financial Development on Economic Growth in the Western Region

Xuehu Wu

doi:10.6981/FEM.202501_6(1).0008

Authors

Xuehu Wu

DOI:

https://doi.org/10.6981/FEM.202501_6(1).0008

Keywords:

Western Region; Financial Development; Economic Growth; Panel Threshold Model; Financial Structure.

Abstract

Finance, as the core and hub of modern economy, has a crucial role in economic growth and development. This paper addresses the impact of financial development on economic growth in the western region. Firstly, it is the theoretical analysis of financial development and economic growth, and then it adopts the panel threshold model, collects and organizes the panel data of 12 provinces in the western region from 2000 to 2019, and selects the relevant indexes to carry out an empirical research based on the role of the scale, efficiency and structure of financial development on the economic growth of the western region. The empirical results show that: in the early period, the financial scale inhibited the economic growth of the western region, and with the expansion of the financial scale beyond a certain threshold, it began to promote the economic growth of the western region; for the enhancement of financial efficiency, due to the diminishing marginal efficiency, its promotion of the economic growth of the western region is gradually weakening; however, there has always been a financial structure of the western region that inhibits the economic growth of the western region, which is consistent with the This is directly related to the fact that the proportion of direct financing in the financial structure, which is mainly based on the capital market, is too low. Whether it is to expand the financial scale or to play the financial efficiency, it is only the premise and foundation for promoting the economic growth of the western region, only the optimization of the financial structure can qualitatively improve the financial development of the western region to a higher level, so as to promote the economic growth of the western region. In this regard, the author suggests that the governments of the western provinces can optimize the financial structure of the western region and promote the economic growth of the western region by establishing and improving the multi-level capital market system in the western region as well as increasing the proportion of direct financing.

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