The Impact Of Local Government Debt On Commodity House Prices

House prices are closely linked to China’s economy,and the problems caused by housing prices cannot be ignored.The relationship between local government and land finance has a long history.The starting point of this paper is the kidnapping of the land market by the local government’s debt behavior.Then,according to this logic,will the local government’s debt really have a positive impact on the real estate price? And will the impact be worse for local governments,which rely more on land sales?Based on the above logic,the core hypothesis proposed in this paper is that the local government’s debt behavior will have a positive impact on the real estate price.Moreover,the degree of land dependence of local governments has a significant positive regulating effect on this effect.In order to verify these two core issues,this paper studies from theoretical and empirical perspectives respectively.Firstly,this paper defines and explains the basic concepts of real estate price,debt,local government debt and local government bonds,and sorts out relevant literatures to further clarify the research direction.This paper constructs a simple theoretical model by using the setting method of intertemporal consumption model and general equilibrium model.In this model,it is assumed that there are only ordinary consumers,real estate developers and local governments.Our idea is: there are only two ordinary consumers can choose products,real estate and other consumer goods,and consumption of the typical consumer life is divided into two time 1 and 2,provisions in 1 stage,real estate consumers only consumption,consumption in 2 phase only other consumer goods,consumer’s goal is based on the life of the budget constraints of utility maximization.The purpose of real estate developers is to maximize the profit of real estate development.This article assumes that the local government of production factors as capital,loan capital and other capital investment K and ′,and other elements N,seeking the maximum size of the local economy of local government,to select the most optimal inputs.On the behavior of the three economies strives for the optimal solution,can be obtained,if the local government efforts to seeking the maximum size of the local economy,real estate development land costs,then,that local government land transfer income is higher,the more power of local government debt,the more power and more land for economic development.Thus,we can further obtain the positive relationship between real estate prices and local government borrowing capital.Therefore,the theoretical model constructed in this paper supports the core hypothesis of the paper and provides theoretical support for the empirical model.In the empirical part,this paper mainly verifies two hypotheses:H1: rising local government debt will boost property prices.H2: the degree of land dependence of local governments has a significant positive regulating effect on the role of H1.In the individual time fixed effect model selected in this paper,our research object is the provincial panel data of 30 provinces and autonomous regions,and the data is from 2005 to 2017.Real estate price is the key variable studied in this paper.The real estate price used in this paper is the average real estate price in the region,which is obtained by comparing the annual total sales volume of real estate with the annual total sales area.There are two core independent variables: local government debt and land transfer revenue.In the empirical model part of this paper,annual issuance of municipal bond is adopted as the substitution variable of local government debt.In the robustness test part,the paper will consider the influence of local government inventory debt(Ctbondstock).A few provinces lack municipal bond in specific years.This paper uses general corporate bonds,medium-term notes and short-term financing bonds to replace them.When studying the regulatory effect of local government land dependence,this paper constructs the Lfd,a new variable of local government land fiscal dependence,which is equal to the ratio of local government land transfer revenue and current fiscal revenue.In the empirical test,in order to investigate this regulatory effect,this paper will interact with the Lfd and Ctbodissuance.meanwhile,in order to reduce the error,the local government debt and Lfd were both centralized first.In the robustness test,we use two ideas of substitution variable and lag time.The results of the two approaches are in line with expectations: one is that the debt accumulated by local governments does have a significant positive effect on real estate prices;the other is that the more local governments rely on land transfer revenue,the stronger the impact of local government debt on real estate prices.To sum up,the core hypothesis proposed in this paper has been verified theoretically and empirically.Based on this,this paper proposes that the debt scale of local governments should be appropriately controlled,the debt structure of local governments should be improved,and the debt management of local governments should be further optimized.On the basis of learning and referring to the research this paper tries to innovate from the following three aspects: first,it makes a breakthrough from the perspective of research.This paper tries to study the housing price from the perspective of local government debt to provide possible operational evidence for the regulation of the real estate market.The second is the theoretical model.Although the assumptions in the model are far from the reality,this simple model proves the relationship between real estate prices and local government liabilities.The third is the empirical model.Based on the analysis of the interprovincial balance panel data,this paper examines the impact of local government debt on real estate prices and the regulatory effect of local government land fiscal dependence.The results above all pass the robustness test.Of course,limited by the author’s research ability,this paper still has some deficiencies.First,the theoretical model needs to be further optimized,and many hypotheses can be further explored to better fit the actual situation.Second,empirically,although we have tested the positive impact of local government debt on real estate prices,the endogenous problem of the model is also very likely to exist.Since it is difficult to find appropriate instrumental variables for local government debt,this problem needs to be further studied.