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《Financial Economics Research》 2018-02
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Has Financial Expansion Hurt the Real Economy:A Theoretical and Empirical Analysis Based on the Two-Sector Division Method

Wu Mei;Wang Chenchen;School of Economics and Commerce,South China University of Technology;  
Theoretically,an optimal path exists for the financial sector,alongside a realistic scale of expansion. Excessive expansion of the financial sector tends to have a negative impact on the real economy. Using data from 31 Chinese provinces( autonomous regions and municipalities)from 1998 to 2014,this study empirically analyzed the relationship between financial expansion and the real economy. The results confirmed that the financial sector had an optimal size. Moreover,the financial expansion prior to 2008 was found to have stimulated the real economy;however,expansion following 2008 was found to have a long-term suppressive effect on the real economy. In addition to the"crowding out"effect on the real economy,financial expansion also reduces the efficiency of output. Furthermore,in recent years,the marginal output of capital of the real economy has been gradually driven towards zero,suggesting that the disconnection between the financial sector and the real economy is also related to the low productivity of the real economy.
【Fund】: 广东省自然科学基金项目(2015A030313216);; 广东省软科学项目(2015A070704007);; 广州市哲学社会科学发展“十二五”规划课题(15G05);; 中央高校基本科研业务费专项资金资助项目(XZD19)
【CateGory Index】: F124;F832
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