Study on the Relationship Between Local Government Behavior and the Differences of Regional Financial Development

Taking eastern, central and western regions as basis for classification, and using relevant data from 1986 to 2010, through the fluctuation of the index of financial revenue and expenditure gap ratio, this article firstly proves China’s local government behavior of financial intervention is the objective existence; then through regression analysis of per capita GDP, which is the quantitative indicators of the local government behavior, and financial interrelation ratio(FIR), which is the indicators of the degree of financial development, this article studies the extent and impact of the three regions’ government intervention; Thereafter, to test the causal relationship between government behavior and regional financial development in the three regions by Granger test; further, by using the impulse response function, the article analyzes the influence of local government behavior on the region’s financial development level. The study found that the formation of China’s regional financial difference is not driven by market factors; government intervention occupies a crucial position in various factors of the formation of regional financial development’s difference.