Abstract: With the outbreak of subprime crisis and European debt crisis in succession, financial institution stability has become an important issue in financial and economic research. A great many factors influence financial institution stability, and macroeconomic situation affects a lot. In this paper, we use rolling correlation coefficient and regime switching model to research the correlation between financial institution fragility and economic growth. The results show that there are two kinds of converse correlation regime between financial institution fragility and economic growth. Economic growth can improve financial institution fragility during a boom and it may weaken the financial institution fragility when suffering the recession. Moreover, financial institution fragility may maintain for a long time in a high fluctuation regime.

Key words: financial fragility; economic growth; rolling related; regime switching model