Study On The Optimum Scale And Debt Benefits Of Local Government Bonds

Summary with the reform of tax-sharing system and a new type of industrialization and urbanization,fiscal gap of local government is growing.Local governments have to borrow lots of money via financing platforms.In the2015 local government debt balances up to 16 trillion,of which 15.4 trillion debt is before 2014.And only more than 1 trillion is approved,all substandard debts.Huge debts caused a panic,so our country published emergency policies to rectify irregularities of local financing platforms.In order to inject new vitality to the local economy,and prevent risk of hidden debt,local government bonds began entering the China market to help broaden financing channels and relieve financial pressure.From 2009 to 2016 our country gradually open local bond issuance in China.To date the provinces have their own right to issue local bondscbut the scale of local bonds received the central quota management.So forecasting the optimum scale of local government bonds becomes the most important and the most pressing research.Only by eliminating concerns about debt risk,local bonds issue by the market is realized.This study on local government bonds in this context,by using the asset and liability method and the KMV risk model to establish nonlinear prediction model to forecast the optimal scale of local bonds.By analyzing the degree of deviation from the optimal security scale and the cost of adjustment and optimization,this study empirically examines the dynamic adjustment mechanism of local government bond issuance.By the incremental analysis,the economic and social benefits of debt can be deduced on the basis of the mode,and achieving for the quantitative evaluation of benefits.This is innovation point,namely the model can be used to forecast the optimum scale of local government bonds and evaluate benefits of debt.In the future local government debt forecast model and benefits of debt evaluation model can refer to the model.This study found that two amendments in the KMV model are currentassets and transfer factors,which magnify the optimal security issuance scale of local government bonds to some extent.The optimal security scale of local government bonds is not the only factor in the model,but also the local bond issuance in the past year and adjustment costs.So the prediction of the optimal scale of local bonds is right.Local bonds issuance have social effect for the residents and benefits for businesses,local government and regional development,so the local bonds is the best way to solve the debt dilemma,is the inevitable requirement of modern tax system,is the inevitable choice for the harmonious development of the society,happy live and work.