The Dynamic Two-way Coupling Relationship Of Shadow Bank、Government Debt And Financial Development

In recent years,China’s shadow banks and local government debt problems was highlighted,affecting the overall stability of the economy and finance,becoming the focus of academic attention.According to Moody’s(2016)research,the size of China’s shadow banks rose rapidly after the financial crisis,up to 45 trillion by 2015,and the proportion of shadow banks in GDP rose from 71% at the end of 2014 to 78% at the end of 2015,China’s macroeconomic stability poses a huge threat and challenge.At the same time,after the financial crisis,China’s government debt is also developing rapidly,as of the end of 2014 has reached 30 trillion or so.Shadow bank and government debt in the same period of rapid growth,the relevance of the study is very meaningful.Fitch put China’s credit rating to A + from AA-because of fearing local government debt and the shadow banking bloated,which had a very negative impact on China’s economic development.Financial development not only has a direct impact on the shadow bank,but also involves the local government financing model,and therefore has a close relationship with the local government debt.In conclusion,it is great theoretical significance to research whether there is a relationship between shadow banks,local government debt and financial development.This paper measures the size of the shadow bank from the financial demand side of the shadow bank,measures the size of the government debt with the fiscal deficit,and the financial development level is characterized by the financial correlation rate(FIR),and controls the variable of economic growth.The panel data of thirty provinces from 2003 to2014 were analyzed by dynamic panel vector autoregressive model(PVAR).We can get the following main conclusions:(1)Shadow Banks promoted the expansion of government debt,and local government debt helped boost the prosperity of shadow banks.Since the financial crisis,due to foreign trade blocked,in order to maintain economic growth,local governments have increased investment,resulting in excessive debt.Shadow Bank for the local government to provide a rich and diverse financing,from the objective to promote the expansion of government debt size.Shadow banks are more inclined to finance the government because government projects provide a stable and less risky level for shadow banks.The behavior of local government borrowing not only directly promoted the development of shadow banks,but also squeezed the planned credit,which made it difficult for privateenterprises to obtain funds from traditional commercial banks,thus indirectly promoting the expansion of shadow banks.(2)financial development affects the development of shadow banks and local government debt.China is a banking intermediary(especially large state-owned banks)led by the financial system,financial development can affect the local government financing channels,financial development or financial development is too high is not conducive to local government financing.