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Finance has become the nucleus of modern economy for its strong rallying power and permeability, an efficient financial system can promote economic development greatly through some functions such as configuring resources, transfering information, risk management and supervising companies. In China, rural economy is the foundation for the stable development of the national economy, and the stable development of rural economy needs the support of efficient rural financial system. But in recent years, problems that rural finance of China can not meet what rural economic development needs have been becoming more and more highlighted. "How to apply efficiently rural financial development to promote rural economic growth" has become one of the key issues that affect our economy to have a sustained, rapid and sound development.At present, most of the papers have only introduced the variable of financial development into the model when studying their relationship, so the conclusions may not be very accurate. In view of this, this paper will make the rural financial development, rural human capital, and farmers investment in fixed assets as the factors influencing the rural economic growth. In the same time, it also takes use of the theory which belongs to econometrics, macroeconomics and finance, and theoretical analysis and empirical analysis is combined. This paper tries its best to make the conclusion accurate and persuasive.Firstly, in the second chapter this article expounds the rural financial theory just like agricultural financial theory, rural financial market theory and mis-classification competitive market theory. Then, it sums up some important theories about economic growth such as Harrod—Domar economic growth model, endogenous economic growth model and so on. At last, this part explores the mechanism between rural financial development and rural economic growth on the basis of these theories.Secondly, we design RLG, RDL and RLTL variables to reflect the level of rural financial development according to the former scholars, and then in the forth chapter we analysis the current situation of rural formal finance from these three angles and also the situation of the rural economic growth in china.Thirdly, we study the relationship in the fifth chapter by the empirical method. At first, we adopt ADF method to inspect stationary of the variables, the result indicates that all series are typical I(1) time series. And then, according to Johansen Cointegration Test, we establish a cointegration equation to represent the long-term relationship of these variables, and we know there is negative impact between them. Then we set up VEC model, the result indicates the short-term relationship of these variables. Second, we test the Granger Causality of the economic growth and rural financial development, the results indicate that rural financial development has a faint impact on rural economic growth, but rural economic growth is the Granger cause of rural economic growth. Finally, we set up a state space model to study their dynamic relationship, and this model further responses the financial constraint issue in our rural economic growth.Lastly, based on above empirical analysis, the paper proposed some suggestion to optimize our rural financial system:playing the role of the government to establish a good external environment, innovating the rural financial system itself in existence; and then it also emphasizes how to improve the quality of the financial demanders in order to promote our economy to have a sustained, rapid and sound development.
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