An Empirical Study On The Impact Of Intervention On Local Government Bond Issuance Interest Rates

After the 2008 financial crisis,the government increased the amount of construction funds needed to boost the economy.Local governments do not have the right to issue bonds independently.In order to raise funds,the debt scale of local governments is constantly increasing,which increases the debt risk of the government.In order to solve this problem,the national debt to local governments was gradually relaxed,and finally in 2015,local governments were officially allowed to voluntarily repay bonds,opening a new situation of local bond issuance.However,the non-marketoriented issue of local bonds has become increasingly prominent.Many scholars point out that the interest rate of local bonds issuance in China is low.In the initial stage of spontaneous and self-repayment,the interest rate of local bonds issuance was lower than that of national bonds.However,the phenomenon of non-marketization of interest rate has not been effectively solved,and more human factors have been added.The issue of government intervention has been existing and worth paying attention to.Due to the short time of issuance,there are relatively few researches on local bond issue interest rate in our country,which can fill some theoretical gaps.So this paper analyzes the influence of government intervention on local bond issue interest rate and is a relatively new analysis Angle.In addition,the interest rate of local bond issuance is the focus and difficulty of the state.It is of great significance and value to study the influence of intervention on the interest rate.This paper sorts out and analyzes the historical evolution and development process of local bond issue pricing,and studies the development of local bond market from ancient times to present.Following the analysis methods from normative analysis to empirical research,based on relevant theories,the paper sorts out the motives and channels of government intervention in local debt,and sorts out the mechanism of government intervention.Empirically,unlike other papers,this paper no longer focuses on the negative interest rate spread before 2018,but takes the latest data of 2019-2021,studies the general government bonds issued in three years,and takes the spread between the interest rate of local bonds and the interest rate of the previous five days of national bonds as the explained variable.The proportion of fiscal expenditure in GDP and the proportion of fiscal deposit in GDP were taken as explanatory variables to measure the degree of government intervention,and control variables such as regional economic development and issuance were added.According to the actual situation in the special period,the epidemic situation was set as dummy variable for the first time to construct a multiple linear regression model.This paper finds that: first,government intervention does have a significant negative impact on the issuance rate of local bonds.The stronger the administrative intervention of local governments,the lower the issuance rate of local bonds,which is more consistent with the article’s expectations;Second,the government intervened in the issuance of local bonds by setting the range and scale of bid interest rates;Third,the government has the motivation to lower the cost of issuing bonds and ease financial pressure.Finally,with the purpose of promoting the rational pricing of bond issuance,this paper puts forward corresponding policy recommendations from the aspects of government behavior and local bond issuance mechanism,including optimizing the local development and official promotion evaluation system,improving the operation process of local bond issuance,and promoting the development of local bond credit rating mechanism and information disclosure mechanism.