Urbanization construction is a historical mission of China’s modernization construction, and is also the largest potential for expanding domestic demand. Actively promoting rural urbanization is favorable for expanding consumption and boosting economic growth. Through building VAR model using data of urbanization level and consumption in 1978-2012, this paper made Granger causality test, impulse response analysis, and variance decomposition analysis on the relation between urbanization and economic growth. In addition, from comparing the effect of urbanization on expanding rural consumption and urban consumption, it is known that the effect of growth of urbanization rate on urban consumption is lower than rural consumption in short term, but urbanization level has a greater contribution to growth of urban consumption in the long run.


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