Empirical analysis of the dynamic relationship between urbanization and Financial development in Guizhou Province, China

Abstract

The relationship between urbanization and financial development attracted wide spread scholars’ attention. The research on relationship between urbanization and financial development can provide a reference for promoting the urbanization process and financial development. Using time series data from 1978 to 2012 in Guizhou Province, China, by building a VAR model, this paper utilizes economic analysis method such as co-integration test, Granger causality test, impulse response function and variance decomposition, to empirically analyze the dynamic relationship between the process of urbanization and financial development in Guizhou Province. The empirical results show that there is long-term stable equilibrium relationship between urbanization and financial development in Guizhou Province; there is bi-directional causal relationship between urbanization level and financial development; the dynamic impulse effects between urbanization and financial development are obvious.

Keywords:

• Urbanization
• Financial development
• Dynamic relationship
• Vector autoregression model