Research On The Generation And Diffusion Mechanism Of Local Government Debt Risk

In recent years,the rapid growth of the scale of local government debt will be easy to generate debt default risk,which will cause systemic and regional financial riskby breaking through the boundary of region and industry.Existing literatures have studied the causes and transmission mechanisms of local government debt risk from different perspectives.However,few literatures usemathematical modelsto deeply analyze the local government debt risk generation mechanism from the perspective of the interaction between the central government supervision strategies and local government debt strategies.Besides,the existing literatures do not fully analyze the diffusion mechanism of local government debt risk,neglect to analyze the horizontal diffusion mechanism of local government debt risk among regions,and lack the application of theoretical models to analyze the local government debt risk diffusion and generation management mechanism.Therefore,this paper analyzes the current situation of local government debt risk.Methods of evolutionary game theory,utility decision model,social network analysis model,spatial measurement model and principal-agent model are adopted to theoretically analyze the generation mechanism and diffusion mechanism of local government debt risk.The horizontal diffusion effect of local government debt risk is empirically tested among regions and on the financial system.Finally,this paper designs a management system scheme for curbing local government debt risk.Main conclusions are as follows: Firstly,local government debt risks on-and off-balance sheet show a trend of accumulation year by year.Secondly,different intensity and dynamic regulatory strategies have a significant impact on the generation of local government debt risk.The central governmentupervision strategy changes dynamically with time and the change of local government debt strategy.The routine supervision strategy which is adopted by the central government after the local government adopting a issuing bonds in accordance with regulationstrategy is the optimal supervision mechanism.Formulating a strict supervision mechanism can help curb the local governmentdebt risk;the establishment of different regulatory strategies is conducive to curbing the generation of local government debt risk at different stages.Thirdly,there are two paths and mechanisms in local government debt risk diffusion.That are horizontal diffusion among regions and financial risk diffusion.The characteristic that the local government debt risk diffuses horizontally among regions is resulted from the horizontal local debt competition mechanism;the local government debt risk has direct and indirect diffusion mechanism on the financial system of the region and surrounding areas.Fourthly,local government debt risk has a horizontal diffusion effect between regions.The local government debt risks in all provinces and regions across the country generally have criss-crossing and interactive diffusion channels,the mutual diffusion and dependence of risks gradually increase,and the diffusion intensity gradually increases;the local government debt risk of the east,central and western regions has spatial correlation and cross-diffusion,the risk diffusion capacity graduallyweakens,andhas the characteristicsof "relational transitivity";there are differences in the diffusion intensity of local government debt risk in different single provinces across the country,and the average diffusion capacity is strong and stable.Fifthly,local government debt risk has a significant diffusion effect on the financial system.There are strong correlation and spatial agglomeration characteristics of local government debt risk and financial risk across the country;local government debt risk has a significant positive direct and indirect diffusion effects on financial risk,which the local government debt risk in the region has a significant positive diffusion effect on the financial system of the region and surrounding areas.Sixthly,this paper innovatively designs the management system of local government debt risk generation and diffusion.Through principal-agent model analysis,it is concluded that the local government fiscal and taxation system,local government debt information disclosure system and management method will have an impact on curbing the generation and diffusion of local government debt risk.Therefore,this paper put forward the management system scheme of local government debt risk from the aspects of modern fiscal and taxationsystem,collaborative management systemand isolation mechanism.The above research conclusions are not only conducive to further enriching the theory of public finance,but also help the regulatory authorities to understand the process of local government debt risk generation and diffusion.Furthermore,it provide a reference for formulating local government debt riskmanagement strategiesand provide stable financial environment for building a new development pattern of "dual circulation".