Analysis Of The Linkage Mechanism Between Local Government Debt And Housing Prices

Since the reform and opening up,the central government has called on local governments vigorously to carry out infrastructure construction in order to promote economic growth and accelerate the development of modernization and urbanization.At the same time,the implementation of the tax-sharing system has caused the problem of imbalance of financial power and power in local governments in China.The increase in the funding gap has put pressure on the local government's fiscal revenue and expenditure,which has forced local governments to make large amounts of debt to make up for the fiscal balance.In addition,with the continuous advancement of urbanization,the real estate industry has developed rapidly and made great contributions to China's national economy.However,the rapid development may be caused by a huge bubble,and its risks cannot be ignored.Some scholars have suggested that "the two major risks that China faces in a period of time are the risks caused by real estate adjustment and local government debt accumulation." Through the analysis,it is not difficult to find that local governments have issued debts for urbanization and developed the local economy.At the same time,they have increased the demand for commercial housing by residents.When the supply is still unable to meet the demand,it has caused rising housing prices.The rise in housing prices has driven up the price of land for the basic elements of commercial housing construction,making it easier for local governments to use land as collateral or use land revenue as a source of repayment to obtain more debt.It can be seen from the theoretical analysis that there is a two-way causal relationship between what we have said.On the basis of previous studies and theoretical analysis,this paper uses the data of 30 provinces,municipalities and autonomous regions in China from 2010 to 2016 to establish an empirical test.First,consider only the government and real estate business departments,establish a model for two-way Granger causality test,the results show that the scale of local government debt and housing prices are each other Granger reasons.Then,a dynamic panel model is established to study the impact mechanism of local government debt on housing prices.The measurement results show that local government debt has a significant positive impact on housing prices,that is,local governments make up for the lack of local fiscal revenue through borrowing,and most of the debt revenue used for the construction of urbanization and modernization,which greatly promoted the development of the local economy and the prosperity of the real estate market,causing the rise in housing prices;Then,using the land finance as a bridge to establish a model to study the impact mechanism of house prices on local government debt,the results show that house prices have a significant positive impact on land finance,land finance on local government debt,and house prices directly on local government debt.The increase in sales prices will drive the increase in the price of land for construction of commercial housing,which will increase the fiscal revenue of the land,making it easier for local governments to use land as collateral or use land revenue as a source of debt to obtain more local government debt.Based on the above research results,this paper proposes that local government debt and real estate market supervision and restraint should be strengthened.At the same time,attention should be paid to the linkage effect between local government debt and real estate market,and the two-pronged approach,joint governance,and risk prevention to maintain economic market stability.