The Impact Of Local Government Debt On Economic Growth

With the continuous development of China's economy and the acceleration of the urbanization process and the impact of the 2008 global financial crisis,the scale of government debt in our country has continued to rise,especially the local government debt even rising faster.Based on this background,this paper analyzes the causes and impacts of the debt from the current situation of government debt,and discusses the impact of local government debt on economic growth through the theoretical model and empirical model.By building Over Lapping Generation Models,this paper adds the local government debt variable to the model,obtains the capital movement equation and the relationship between capital stock and government debt in the stable state.The study shows that when the capital stock level is low,the marginal output of capital is high.when the scale of government debt expands,the capital investment will increase,this can improve the steady state capital stock level and promote the economic development.In the high level of capital stock,capital marginal output is low,if the government continue to expand the scale of debt,it will reduce the disposable income of consumers and the savings,and lead the capital level to a low level.From the quantitative point of view,this paper chooses the eastern panel data of East China and establishes the empirical model,and uses the STATA to carry out the SYS-GMM regression.The regression results show that the local government debt and economic growth in East China show the quadratic function model and have the threshold effect.When the local government debt is low,the increasing ratio of local government debt and GDP is conducive to economic growth;when the local government debt is high,the increasing ratio of local government debt and GDP is harmful of economic growth.Based on the theoretical and empirical results,combined with the current situation of local government debt,this paper puts forward the following policy recommendations:(1)The central government and local governments should play their respective government functions;(2)according to the local economic conditions,management the government debt scale scientifically;(3)improve the system construction;(4)learn from Europe and the United States and Japan and other countries of the debt management experience.