Local Government Debt Scale Risk Analysis Based On Monte Carlo Method

For a rather long time,the problem of local government debt has not attracted people's attention.However,with the occurrence of some foreign government bankruptcy incidents,people are aware that local government debt also has considerable risks.At the same time,due to the social influence of the government,once local government debt defaults occur,it will bring great negative effects to the society: reduce the government's credit,increase social instability,the entire society's order and resource utilization will be greatly destroyed.At the same time,relevant data shows that in recent years,the scale of local government debt in our country is quite huge,and the growth rate is fast.Compared with foreign governments,China's relevant laws and regulations on local government debt are not perfect,lack of effective supervision and management mechanisms,information disclosure mechanisms,and performance evaluation mechanisms.Therefore,more and more scholars have turned the direction of research into local government debt risks and analyzed and discussed the causes of local government debt,early warning mechanisms,and evaluation mechanisms.At the same time,the central government also paid great attention to the issue of local government debt and continued to publish relevant documents and instructions on local government debt.Under such a realistic background and policy background,this paper attempts to establish a scientifically effective and easily extendable and widely applicable method for the evaluation of local government debt risks.This paper uses the KMV model to calculate the local government debt risk in various provinces and cities across the country in 2014.The study found that the local government's debt risk in all regions is generally controllable,but local areas such as Chongqing Province and Guizhou Province own quite high local government debt risk.At the same time,through the expansion of the KMV model,it can be seen that after considering multiple regions as a joint entity,the debt risk of the local government can be significantly reduced.Therefore,an appropriate local government debt risk supervision system can be established to realize real-time monitoring of local government debt risks,provide certain reference opinions for the formulation of government policies,and provide early warning and prevention of local government debt risks.Compared with other articles,this paper uses computing power of computer to calculate the debt risk of local government by using Monte Carlo method.With the aid of the abstraction ability of code,the model can be easily expanded and modified.This paper applies the KMV model to multiple local government objects to calculate the overall debt risk,which may be an innovation in this paper.