Research On The Impact Of Local Government Debt On Household Savings

Since 2010,China's economic growth has been slowing down.Local government debt has become a prominent problem that plagues the sustained and healthy development of China's economy.With the increasing financial pressure of local governments,the irrational prosperity of local debt may lead to financial risk,financial risk,social risk.These three risks may lead to systemic risks.According to the national government debt audit report in 2013,by the end of June 2013,the balance of local government debt totaled 108,859.17 billion yuan,the balance of government debt of financing platform companies was 40,755.54,and the debt balance of financing platform accounted for 7.8%of gross domestic product(about 51.89 trillion yuan)in 2012.With the rapid expansion of local debt,the growth rate of residents,savings balance shows a downward trend.The growth rate of household savings balance reached 21.33%in 2009,and then declined year by year.In 2014 it declined to 8.28%.The decline of household savings will not only increase the vulnerability of household assets,but also increase the liquidity risk of banks,which raises the cost of capital of banks and financing cost of enterprises,even squeezes out the investment of enterprises.Therefore,whether the expansion of local government debt leads to the decline of household savings rate remains to be discussed.This paper mainly studies whether the expansion of local government debt will lead to the decline of household savings rate,and the channels will lead to the decline of household savings rate.This paper collects the data of urban investment bonds and local government bonds issued from 2008 to 2017 and collates the data at the prefecture level.According to the issuer of urban investment bonds this paper compiled list of financing platforms.The scale of local government implicit debt is measured by the debt data of local financing platforms.Based on the research conclusions of the existing literature,this paper proposes three kinds of influence channels,namely,the issuing interest rate channel,the land price channel and the inflation channel,which are caused by the expansion of local government debt,and verifies the effectiveness of these three influence channels through empirical analysis.Based on the data of prefecture-level cities from 2009 to 2017,this paper finds that the expansion of local government debt significantly reduces the savings rate of residents,especially the implied debt of local governments.With other conditions unchanged,the local government implied debt rate increases by 1%,the local residents' savings rate decreases by 0.69%.The local government total debt rate increases by 1%,and the local residents' savings rate decreases by 0.53%.This paper also verifies the effectiveness of the three channels.Specifically,the increase of local government debt will increase the issuing interest rate of urban investment bonds.Urban investment bonds become a good choice for individual and institutional investors.Resident savings invest in urban investment bonds through direct and indirect channels,resulting in a decline in the savings rate of residents.In addition,the expansion of local government debt will significantly increase land prices and inflation index,leading to rising house prices and rising cost of living,which will lead to a decline in resident's savings rate.The significance of this study is to link government departments with residential departments,enrich the research ideas of local government debt,and deepen the understanding of the relationship between local government debt and residents,behavior.This paper verifies that the expansion of local government debt leads to the decline of household savings rate,and reveals how local government debt leads to the decline of household savings rate.The paper provide a new idea for preventing local government debt risk,and also provide empirical evidence for understanding how government debt risk is transmitted to the residential sector,at the same time to provide an explanation for the decline of residential savings rate in recent years.