Study On The Influence Of Government Hidden Debt On Financial Risk

For a long time,it has been a difficult problem to maintain steady economic growth and control the risk of the financial system,while the expansion of government debt is a necessary means in the process of economic growth,but also the risk.Expansion of government debt to some extent,satisfy the needs of the urbanization construction,ease the financial governance does not match the result of financial pressure,stimulate the economic recovery and development.But the Chinese government debt expansion contains two major risk factors,one is the recessive debt expansion potential risk has been underestimated,although the recessive debt expansion brought to the attention of the regulators,However,there are few systematic studies on the estimation of the scale of hidden debt,the way of risk diffusion and the spillover effect on the macroeconomic.Second,the expansion of government debt has led to the rise of macroeconomic leverage ratio,shadow banking risk and the integration of debt risk and financial risk,which has increased the instability of the economic system.According to the Financial Stability Report 2021,China’s macro leverage ratio is 279.4%,and the leverage ratio of non-financial enterprises is 162.3%,higher than the international warning line.According to the2020 Global Non-bank Financial Intermediation Monitoring Report released by FSB,the size of China’s non-bank financial intermediation in a narrow sense is 7.8 trillion US dollars,and the risk of hidden sub-banks is concentrated.According to the budget plan,the government deficit in 2020 will be about 3.76 trillion yuan,and the government sector leverage ratio will be 45.6%.Financial risks related to hidden debt remain serious.Based on the above background,this paper firstly combs the domestic and foreign research literature on government hidden debt and financial risk,and determines the main content of this paper,namely,the influence effect of hidden debt on financial risk,the influence of hidden debt on financial risk aggregation and the influence of hidden debt on financial risk network.The paper reviews soft budget constraint theory,financial vulnerability theory,social network theory and public goods theory,which provide the theoretical basis for the existence and development of hidden debt,financial risk transmission and spillover.Then,the construction of a financial risk index to measure financial risk lays a foundation for testing the marginal effect of government hidden debt on financial risk.With the help of global principal component analysis(GPCA),the construction of financial risk index of 31 provinces from 2009 to 2018 to measure the level of financial risk.Furthermore,the kernel density estimation(KDE)method was used to analyze the temporal evolution of financial risks in the eastern,central and western regions,and the Dagum Gini coefficient decomposition method was used to analyze the intra-group and inter-group differences in financial risks in the eastern,central and western regions.Thirdly,the paper studies the effect of implicit government debt on financial risk.The results show that :(1)Implicit debt has a nonlinear influence on financial risk,and the influence of implicit debt expansion on financial risk is also affected by urbanization,financialization and fiscal decentralization.Threshold of recessive debt(2)There is a second-order effect,the recessive debt ratios first-order threshold effect exists,urbanization is a first-order threshold effect,fiscal decentralization is first-order threshold effect,the financial decentralization first-order threshold effect exists,the bigger the government recessive debt and financial risk,the greater the recessive debt expansion will encourage financial risks.(3)Firstly,the intermediary mechanism of shadow banking is tested.The empirical results show that the expansion of implicit government debt will stimulate the further expansion of the scale of silver banking.Secondly,we test the mediating effect of economic growth.Economic growth plays an important mediating mechanism in the influence of government hidden debt on financial risk.The expansion of hidden debt stimulates economic growth,and economic growth is conducive to reducing financial risk.Finally,the mediating effect of land financialization is tested.Implicit debt expansion will lead to the deepening of land financialization,which will further increase financial risks.Then,the paper studies the influence of implicit government debt on financial risk aggregation.The results show that :(1)The government’s hidden debt has a positive impact on financial risk aggregation.Whether the size of hidden debt or the hidden debt rate is the core explanatory variable,the expansion of hidden debt will lead to the increase of financial risk location entropy.(2)When the interaction term between marketization index and implicit debt and the interaction term between credit resource allocation and implicit debt are introduced respectively,the degree of marketization will slow down the risk aggregation effect of the expansion of implicit debt,but the moderating effect of credit resource allocation is not significant.Finally,the paper studies the influence of government hidden debt on financial risk network spillover.The results showed that:(1)The Beijing,Tianjin,Jiangsu,Shanghai and Zhejiang region in the central position in network financial risk,financial risk in other provinces have stronger control and spillover effects,Qinghai,Hainan,Tibet,Xinjiang and Ningxia region in a weak position in the network financial risk,financial risk by other provinces at the mercy of the impact.(2)The government recessive debt can produce a reinforcement network of financial risk,namely the recessive debt expansion will network spillover effect have a positive impact on the financial risk,the higher the degree of industrialization,foreign direct investment is higher,the higher the urbanization rate,the network will overflow level the higher financial risk,and the higher the degree of financial decentralization,the higher the degree of fiscal decentralization,The lower the level of financial risk network spillovers will be.