An Empirical Study Of Local Government Debt And Regional Economic Growth In China

The relationship between local government debt and economic growth has been a hot topic among scholars.There were a large number of documents about local government debt issued by central government or ministerial units from 2014 to 2015 in China,which exceeded the sum of the past decade.The State Council issued “the state the State Council on strengthening the management of local government debt opinions” in 2014 and “Local government debt emergency response plan” in 2016.The Ministry of Finance issued "resolutely curb local governments to buy services in the name of illegal financing of the notice" in 2017.All the documents have indicated that local government debt at the national level of concern,which has caused local government debt to be concerned by more scholars widely.No doubt that local government borrowing has a great impact on local financial and investment,affecting the stability and sustainable development of regional economy.Therefore,it is meaningful to clarify the relationship between local government debt and regional economic growth.Firstly,this paper reviews and summarizes the related research at home and abroad,which is divided into theoretical and empirical studies,finding that the conclusions are quite different based on different data and research methods.But the relation can be generalized as linear relation and nonlinear relation.Secondly,based on the research at home and abroad,the relationship between local government debt and economic growth is studied theoretically.Theocetically,relationship between the debt ratio and economic growth is uncertain.Then we find that there is a nonlinear relationship between the debt ratio and economic growth through the analysis of the Barro model added the borrowing of government departments,which has a critical value in theoretically.Subsequently,empirical study is conducted.The statistical analysis based on the debt obtained by the local government estimation method in Jiajie Xu(2014)shows that the total size of local government debt and the level of regional economic development are positively correlated,and the ratio of local government debt and region economic growth has the complex nonlinear relationship.Then,the nonlinear relationship between local government debt and economic growth is tested by using the SYS-GMM estimation method.The results show that there is a nonlinear relationship between them,but not clearly.In order to clarify the nonlinear relationship between local government debt and economic growth,the paper adopts panel threshold model to find the threshold value of local government debt.Data simulation results show that there is a clear nonlinear relationship between local government debt and regional economic growth.The government debt and regional economic growth are positive correlated when the debt ratio is less than 16.73%,and have negative relationship when the debt ratio exceeds 16.73%.Finally,we give some reasonable policy suggestions based on the conclusions of this paper.