Empirical Study on the Relationship between the Local Fiscal Revenue and Expenditure and the Development of Financial Industry in Shanghai

Hong-jiang Li, Zhen Yu, Xiao-yu Zhao


The purpose of this paper is to explore the relationship among the local fiscal revenue, local fiscal expenditure and the development of financial industry. The methodologies used in the study include Vector Autoregressive Model, Impulse Response Function, Variance Decomposition, Granger Causality Test, Johansen Cointegration Test and Vector Error Correction Model. Then we come to the conclusion that local fiscal revenue exerts a negative influence on the development of financial industry; on the contrary, local fiscal expenditure can apply a positive impact. Lastly, the reasonable fiscal policies to promote the development of financial industry are put forward.


Fiscal revenue; Fiscal expenditure; Financial industry; Vector autoregressive model; Johansen cointegration test; Vector error correction model

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