Research On The Impact Of Local Government Debt On Economic Growth In China

The global financial crisis triggered by the US subprime mortgage crisis in 2008 brought huge economic shocks to countries around the world.China has adopted a 4 trillion economic stimulus plan to cope with the financial crisis,The central government has undertaken 1.18 trillion yuan,the remaining funds are raised by local governments to issue debts or borrow loans.Under the guidance of the macroeconomic situation and the guidance of the government’s economic policies,China’s local investment and financing platforms have sprung up,and local government debt has expanded rapidly like snowballs.Local government debt plays a crucial role in the government’s regulation of resource allocation,broadening financing channels and promoting urbanization.Studying the relationship between local government debt and economic growth in China will help to comprehensively understand the current situation of local government debt,facilitate the supervision and prevention of local government debt risks,and it has great research significance for local governments to control debt risk and promote local economic development.This paper analyzes the relationship between local government debt and regional economic growth in China.The first chapter introduces the research background and the overall framework structure of the paper.The second chapter is the combination of relevant theoretical literature,including Keynesian debt benefit theory,the debt liability theory of classical economics,the debt no-impact theory under Ricardo’s equivalence theorem.The third chapter mainly analyzes the overall scale and structure of China’s local government debt,discusses the reasons for the formation of local government debt in China and studies its economic effects.The fourth chapter is mainly about the theoretical model analysis of the impact of local government debt on economic growth.With reference to the short-term economic fluctuations of the IS-LM model to explore the short-term impact of local government debt on local economic growth,the Soro model of long-term economic growth is used to study the long-term effects of local government debt on local economic growth.The fifth chapter is mainly the empirical analysis of the impact of local government debt on economic growth.Thirty provincial and municipal governments(excluding Tibet,Hong Kong,Macao and Taiwan)across the country were selected as research objects to collect the 2009-2017 local government debt and local economic development panel data for descriptive statistics,correlation analysis,Panel unit root test,Hausman test,F test and LR test,fixed effect regression analysis and robustness test.The sixth chapter is based on the theoretical model and empirical research to provide relevant recommendations for local governments to control the size of debt,prevent debt risks and promote local economic development.The empirical results show that there is a clear positive “U”-type relationship between local government debt and economic growth in the short term.There is a significant positive “U”-type nonlinear relationship between local government debt and economic growth in the long run.The results show that local government debt has a threshold effect on local economic growth.When local government debt is low,there is a negative correlation between government debt and economic growth.Only when there is a certain scale of local government debt,there is a positive correlation between government debt and economic growth,which has a positive effect on economic growth.