Empirical Research On Macroeconomic Impacts Of China's Local Government Debt

Since the implementation of tax distribution system reform in China,local financial authority and powers mismatching matter is being created,and it causes the high local government leverage ratio problem.In 2009,in order to quickly recover from global financial crisis,central government pushed out Four Thousand Billion Stimulus Plan to the economy,which aggravated the mismatching matter and drived the explosive growth of local government debt scale.The problem causing by local government debt has drawed huge attention from academics and government authority.Empirical research on macroeconomic impacts of China's local government debt,could sort out the relationships between fiscal and monetary policies and propose suitable policy suggestion for preventing and defusing local government debt risks.Besides,it could also provide new research prospective and approach for relieving economic stress,guarding against financial risks,and enhancing the financial services spanning the real economy.This dissertation uses 31 provinces panel data,mediation model,PVAR model,regression discontinuity model,difference-in difference model to discover local government debt's macroeconomic impact.To illustrate,macroeconomic impact analysis involves impact on economy growth,fincial risk,and entity enterprises' credit financing,as well as the connected effect among local government debt,entity enterprises' credit financing and economy growth.Based on the analysis above,debt replacement's macroeconomic mitigation effect is evaluated.Totally,this dissertation includes three parts.In the first part,it includes chapter 1,2,and 3,which discusses introduction,research status review,and local government debt measurement comparison,respectively.In chapter 1,it mainly introduces the research background and research meaning,core innovation points and research limitations.In chapter 2,inadequacy of research status review is teasing out.In chapter 3,by making comparison analysis among the present measurement,the suitable local government debt measurement method is chosen according to the research target.In the second part,in includes chapter 4 to 8.In chapter 4,it discusses local government debt's linear and non-linear influence on economic growth.In chapter 5,the risk transfer influence and paths from local government debt to financial sectors are analyzed from both housing market and banking prospective.In chapter 6,the theoretical framework of local government debt's crowding-out effect on entity enterprises'financing is proposed,and then in relevant empirical analysis,not only the crowding-out effect is confirmed,but also the heterogeneity of the effect and boosting of land finance and government intervention.In chapter 7,based on the above-mentioned,the connected effect and dynamic influence paths of local government debt,entity enterprises' financing,and economic growth is argued.In chapter 8,it focuses on the evaluation of debt replacement's macroeconomic mitigation effect,including the macroeconomic mitigation effect on entity enterprises'financing and economic growth.Chapter 9 is the third part,and it concludes the main points and proposes policy suggestion.This article draws four main conclusions.First,local government debt's impact on housing market and banking including direct and indirect influence;further,land finance,credit expansion,and shadow banking are effective risk transfer paths.Second,increasing local government debt scale crowds out entity enterprises' credit financing,and the crowding-out effect shows heterogeneous;moreover,government intervention and land finance give the crowding-out effect a boost.Third,local government debt,entity enterprises' financing,and economic growth present connected effect.Dynamic influence paths analysis shows that the crowding-out effect is long lasting,while the local government debt and entity enterprises' financing effect on economic is short period,but the effect degree is increasing with time.Fourth,debt replacement's macroeconomic mitigation effect is conductive to entity enterprises'financing and economic growth,and the main influence path is financial system efficiency.Compared with existing researches,innovation points are as follows.First,from both housing market and banking respective,this dissertation talks about risk transfer from local government debt to financial sector,and makes use of mediation model to analyse the transfer paths of land finance,credit expansion,and shadow banking.Second,by using micro-data,this dissertation researches on local government debt's crowding-out effect on entity enterprises'financing,the scale and ownership heterogeneity of crowding-out effect,and also the boost given by government intervention and land finance.Third,local government debt,entity enterprises'financing,and economic growth are brought into a uniform analysis framework,and their connected effect is analyzed;moreover,dynamic influence paths are analyzed by using PVAR model.Forth,macroeconomic mitigation effect of debt replacement is evaluated by making using of regression discontinuity model,and its mechanism is investigated by using both regression discontinuity model and difference-in difference model.In conclusion,total local government debt risk is under control,but the risk transfer,crowding-out effect,and connected effect should not be ignored,and the significant macroeconomic mitigation effect performed by debt replacement plays a vital role on defusing of local government debt risk.Hence,debt management policy making considering the macroeconomic impact can not only resolve local government debt risk,but also indirectly guard again financial risk,enhance the financial services spanning the real economy,and release economic growth stress.