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Stock Markets, Financial Depth, and Economic Growth in China: Evidence from ARDL Model

Author

Listed:
  • Bouattour Afef

    (Economics, Higher Institute of Business Administration of Sfax, University of Sfax, Sfax, Tunisia)

  • Kalai Maha

    (Quantitative Methods, Faculty of Economics and Management of Sfax, University of Sfax, Sfax, Tunisia)

  • Helali Kamel

    (Quantitative Methods, Faculty of Economics and Management of Sfax, University of Sfax, Sfax, Tunisia)

Abstract
The relationship between financial development and economic growth in China is controversial. From this perspective, this article aims to identify this relationship using both capital market and banking intermediation indicators, which were rarely considered in the previous literature. An autoregressive model with staggered lags (ARDL) examines the long-run cointegration relationship between 1980 and 2020. The results suggest that the contribution of different subsectors of the Chinese financial system to economic growth differs. The development of the money market has a negative impact, whereas market capitalization has a positive impact on economic growth in China. Regarding the contribution of the banking system to China’s economic growth, the two variables measuring the depth of financial institutions showed opposite impacts in both the short and long term. Regarding important policy implications, regulators need to ensure a pro-growth environment, effectively regulate the informal banking system, and prevent potential financial risks by revising policies.

Suggested Citation

  • Bouattour Afef & Kalai Maha & Helali Kamel, 2024. "Stock Markets, Financial Depth, and Economic Growth in China: Evidence from ARDL Model," China Finance and Economic Review, De Gruyter, vol. 13(1), pages 88-111, March.
    • Handle: RePEc:bpj:cferev:v:13:y:2024:i:1:p:88-111:n:5
    DOI: 10.1515/cfer-2024-0005
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