The Matching Degree between Financial Structure and Technical Level and Economic Development

New Structural Economics suggests that there is no universally optimal financial structure for all countries,only when the financial structure match well with the technical level, it can effectively promote economic growth. Following corporate finance literatures, we try to discuss the measurement of regression residual on the abnormal level of the explained variables, regard the residual after the regression of each country’s financial structure on technical level as the main substitute variable, and then test the issue. The empirical results show that the matching degree between financial structure and technical level is significantly positively correlated to economic development, and the effect tends to be more obvious in developing countries. This paper also uses the alternative measure financial structure, the sociology’s hierarchical matching method to measure the matching degree between financial structure and technical level,and the instrumental variables method to deal with the possible endogenous problems, all empirical results supportthe same conclusions. To make a comparison, we add the gap variables of the optimal financial structure which regards OECD countries as the optimal criterion into our regression equation, the results indicate that our coordination variables are more significant and have stronger explanatory power on economic growth.Further research finds that promoting the growth of TFP is the mechanism through which the matching relationship affects economic development.