The Influence Of Fiscal Pressure On The Expansion Of Local Government Debt

Preventing and resolving major risks is an important task mentioned in the 20th National Congress report,and the risk of local government debt falls under the category of major risks.In recent years,the scale of local government debt in China has been expanding and growing at a relatively fast pace,so in this context,it is increasingly important to pay attention to the reasons for the continuous expansion of local government debt and the accumulation of local government debt risks.This thesis analyses the reasons for the growth of local government debt in China under the framework of financial decentralisation and in the context of fiscal pressure from the perspective of fiscal and financial correlation.By analysing the formation and evolution of local government fiscal pressure,financial decentralisation and local government debt,three hypotheses are proposed:fiscal pressure will promote the growth of local government debt,financial decentralisation will promote the growth of local government debt and financial decentralisation will strengthen the positive effect of fiscal pressure on the growth of local government debt.Empirically,a benchmark regression is conducted on fiscal pressure,financial decentralisation and local government debt through a fixed-effects model based on municipal-level panel data from 2006-2021,and on the basis of this benchmark regression,the moderating effect of financial decentralisation in the role of fiscal pressure on local government debt expansion is tested,and the explanatory and control variables are lagged by one period,substituted variables,and the sample size is changed by Endogeneity and robustness tests were conducted,and finally the study sample was classified by region and time of indebtedness to discuss the heterogeneous characteristics of fiscal stress under different nature groups.The final results show that fiscal pressure,characterised by the local fiscal gap,has a significant contribution to the growth of local government debt,with fiscal pressure giving the initial cause of local government debt borrowing;financial decentralisation shows a positive contribution to the growth of local debt in fiscal pressure,manifesting as fiscal pressure being the cause of local government debt borrowing,and financial decentralisation being the The heterogeneity analysis found that the debt expansion effect of fiscal pressure and the moderating effect of financial decentralisation were more significant in the eastern and western regions,and the debt expansion effect of fiscal pressure and the moderating effect of financial decentralisation in China only became obvious and significant after 2009.In summary,against the background of the continuing contradiction between local government finance and revenue and the expanding scale of debt,this thesis puts forward corresponding policy recommendations in three aspects:resolving the contradiction of fiscal pressure,optimising the development of financial decentralisation and strengthening local government debt management,based on the findings of the study.