A Study Of The Spillover Of Local Government Debt On Bank Credit Risk

Over the past twenty years,the scale of local government debt is growing exponentially,literally higner than GDP and fiscal revenue over the same period,it has been a common sense that the existence of the local government debt risk.Local governments have the motivation,conditions,and soft constraints of risk spillover,banks and other financial institutions which with close financial dealings have become the risk undertaking subject.This paper takes the perspective of bank credit risk control,reveals that how the risk of local government debt spillovers to banks and other financial institutions,particularly its transmission mechanism which empirically test by spatial econometric method,based on empirical level illustrates the direction and degree of spillover,and the corresponding constraints,and then put forward relevent mechanism innovation of the risk control for bank credit.First,the preparation for researching foundation.Combing the theory,concept and literature review of risk spillover.Second,research on the transmission mechanism from the theoretical level.From the theoretical part,the relationship between local government debt and bank credit,as well as the transmission mechanism of risk spillover has been analyzed.Third,research on the transmission mechanism from the empirical level.From the empirical part,an empirical test of the local government debt on bank credit risk spillover using spatial econometrics.This paper revealed:Firstly,Lenders always cannot call in a loan which is mostly because lack of enough information,borrowers access details more,and lenders are just opposite,there is information asymmetry between the two parties,so that the borrowers may be subject to the risk of spillover to the lenders.For the analysis and mining of the problem behind,draw lessons from information asymmetry theory and externality theory;for the resolution of the problem,co-opted relevent risk control theory,to sumarrize the research inspiration for providing theoretical basis.In addition,understanding the concept of limited commitment,risk shifting and bank credit risk,to clear and definite the process of risking spillover.According to the purpose of the paper to conclude that the transmission mechanism,research methods,and risk control,found that most of research take big banks as the subject of the study,but less on local banks,also less focus on the transfer carrier,namely liquidity of funds which is the breakthrough point of this paper.Secondly,Taking the special relationship between local government and government as the starting point,divided into three parts which are the planned economy period,the beginning of reform and opening up,reform of the tax system,revealed that changes occured.Based on this,to analyze the borrowing demand,and illustrate the inner connection between local debt and bank credit.The emphases is to build the theoretical mechanism for the transmission,contains motivations,conditions,possibilities,constraint factors,for providing the basis for the empirical study.Thirdly,Selected the liquidity of assets and the liquidity of liabilities as dependents which reflect the liquidity of bank credit funds,and analyzed the exploratory spatial data.In terms of testing for local government debt to the liquidity of assets,found that the exists of adverse effect which may conduct to banks related in other regions.In testing the influence of local government debt to the liquidity of assets,revealed that the nagative effect,however,it was unclear among the regions.As a whole,local government physically spills risks into banks.Moreover,take the binding force into account,found that the rate of investment pull,the supervision of higher authorities,the deposit of government and enterprises&institutions,one of them has a significant inhibitory effect that local government debt to the liquidity of assets.At the same time,the consumption of urban and rural residents,government spending out and tax intensity also significantly strengthen the risk spillover.According to the research results above,controling the credit risk of the innovation mechanism,mainly from the specification of relationship between local governments and banks,matching to improve the bank loan quota system,strengthening the supervision mechanism of central government to local governments.