The Impact Of Economic Policy Uncertainty On The Credit Risk Of Urban Investment Bonds

The reform of the tax system in 1994 was a huge change in China’s financial management system.Since then,the financial gap of local governments continued to expand,and local development was hindered by funding.In recent years,with the rapid growth of local economy,local government debt has also been rapidly expanding,and the problems caused by local government debt have become increasingly prominent.As a new financing model for local governments,urban investment bonds have also become a hot issue of concern in recent years.Currently,the world is experiencing major changes that have not occurred in a century.The level of uncertainty in economic policies is constantly rising,which has had a serious impact on both the macro and micro economies of our country.At the same time,it has also led to an increase in the level of market instability,higher market interest rates,and higher credit risks for urban investment bonds.This article sorts out and summarizes the research literature on urban investment bonds and economic policy uncertainty,and then conducts a theoretical analysis of the impact of economic policy uncertainty on the credit risk of urban investment bonds.From a general perspective,this article uses data from 2013 to 2021 as a sample to study whether economic policy uncertainty can affect the credit risk of urban investment bonds.Considering its particularity,this article explores the impact of economic policy uncertainty on the credit risk of "14 Beijing Investment Bonds" and explores its transmission path.Specifically,the research results show that:(1)increases in economic policy uncertainty will result in increases in the credit risk of urban investment bonds.(2)Uncertainty in economic policy affects the credit risk of urban investment bonds primarily through three channels.financial market,local economy,and enterprises.(3)The impact of economic policy uncertainty on the credit risk of urban investment bonds gradually weakens as their ratings rise.(4)The impact of economic policy uncertainty on urban investment bond credit risk varies across regions,which has the largest impact on the east region,followed by the central region,and the smallest impact on the west region.The innovation of this article is:(1)Innovation in research perspective.There are many existing studies on the impact of economic policy uncertainty on corporate bonds,and many have studied economic policy uncertainty or the credit risk of urban investment bonds.However,few have studied urban investment bonds from the perspective of economic policy uncertainty.This article provides a new explanation with more macro policy implications for the study of the credit risk of urban investment bonds.(2)Research mechanism innovation.In the study of the impact of economic policy uncertainty on bond spreads,the existing literature has primarily discussed the impact of economic policy uncertainty on firm financing constraints,thereby increasing bond spreads.However,in this paper,considering the particularity of urban investment bonds,this article not only considers from the perspective of enterprises,but also conducts mechanism analysis from the perspective of government and financial markets.