Research On My Country's Local Government Debt Systemic Risk Monitoring Program Based On CoES

The structural and regional risk problems of local government debt with strong externality in China have been around for a long time,if the crisis breaks out it will not only impact the local economic and social development,but also spill over and produce a chain reaction,which will trigger a systemic global crisis.At this stage,China has established a multi-indicator debt financing system covering the disposal of local government stock debt,follow-up financing of projects under construction,debt scale,budget management,and risk warning.But the system,starting only from a single body,has not taken into account the systemic risks that can arise from debt linkages between local governments arising from information contagion.Based on the CoES model,taking the 31 inter-provincial local government debt as the research object,taking the measurement of the systemic risk of local government debt as the research content,analyzing the systemic risk of China’s inter-provincial local government debt from the perspective of debt service risk,and evaluating the systemic risk of the debt of each province,identifying the systemic importance of the government.Finally,the policy proposals to promote the development of local government debt,prevent and resolve debt risk are put forward.The research content mainly includes four aspects: the calculation of local government debt balance,the main explanation of variable default distance,the construction of systemic risk monitoring index of default distance of local government sittivated by inter-provincial government,and the identification of systemic importance of local government.The following conclusions are mainly concluded: First,by using systemic risk monitoring indicators such as MES,SRISK,CoVaR,up-down-down CoES to measure the systemic risk of local government debt,Multiple systemic risk indicators from different perspectives have different emphasis on measuring the systemic risk of local government debt default.At the same time,according to the systemic risk monitoring indicators of the systemic importance of local governments and the 2019 financial report based on debt balance,average remaining period,debt size,leverage and other indicators of the focus on local governments have a greater difference.High individual risk is not equal to high systemic risk,the local government risk assessment mechanism adopted in China at this stage can not capture the systemic spillover of debt risk and effectively avoid the occurrence of systemic crisis.Secondly,through the comprehensive cross-sectional value method and Spielman grade correlation coefficient method to MES,SRISK,CoVaR,up-down CoES and other systemic risk monitoring indicators to find that the following line CoES for the monitoring indicators of the local government debt systemic risk is more comprehensive and effective.The monthly values of CoES are sorted by the dynamic severity of the default distance of 31 provincial local governments in 2019,and the system-important governments of Henan,Anhui,Jilin,Yunnan,Xinjiang,Hebei,Shaanxi,Guangxi,Gansu and Jiangsu are identified according to their monthly order values.Third,in view of the above results,the following suggestions are put forward to the local government debt monitoring mechanism at present in China.First,we should speed up the improvement of the systemic risk monitoring system in local government debt risk assessment mechanisms,including MES,SRISK,CoVaR,up-down-down CoES,etc.Secondly,the system risk measurement standard of local government debt should be reasonably defined.Finally,the establishment and improvement of the provincial system is important local government debt evaluation system.