Research On The Impact Of Local Government Debt On Regional Financial Risks

The report of the 19 th National Congress pointed out that guarding the bottom line of not occurring systemic financial risks and ensuring financial security are important components of national security.At present,the problem of government debt,including the excessive expansion of local government debt,is prominent,and local governments are not only the governors of regional financial risks,but also the producers of regional financial risks.Local government debt has a dual role: appropriate borrowing can promote economic development,improve people’s livelihood,and reduce regional fiscal pressure.As economic strength increases,so will the region’s ability to resist risks.However,government debt in some regions is now too high to exceed the upper limit of their economic capacity,and the risks may be transmitted to the financial system through debt correlation,and even threaten the macroeconomy.Based on the provincial data of 30 provinces(autonomous regions and municipalities directly under the central government)(excluding Tibet)from 2015 to 2021,this paper uses the fixed-effect model for empirical testing,and analyzes heterogeneity and regulatory effects for indepth analysis of the impact paths and mechanisms of the two.The empirical results show that there is a significant "U" relationship between local government debt and regional financial risk.There is one of the most moderate borrowing scales for local government borrowing,that is,the inflection point of the "U" curve of the two.When local government debt is within a moderate range,the growth of local government debt can inhibit the occurrence of regional financial risks,and the continued expansion of debt beyond the appropriate scale will aggravate regional financial risks.The heterogeneity analysis according to region and debt nature shows that there are differences in the impact relationship between the two after the regression by region and the nature of debt.Adding government fiscal autonomy will strengthen the "U" effect of government debt in the central and western regions on regional financial risks.Relatively speaking,the current scale of government debt in most eastern regions is low,but attention should be paid to preventing and controlling financial risks.However,the current government debt situation in the west and northeast is relatively serious,some regions face high risks while high debt,and the scale of debt and financial risks in the central region are relatively low.According to this,the research enlightenment is: First,we should focus on the financial risk problem in the eastern region.The scale of debt in some western regions remains high,and the excessive expansion of their debt scale should be controlled,and efforts should be made to resolve debts that are about to mature.Second,it is necessary to promote the reform of the financial system and rationally plan future fiscal revenue and expenditure.It is necessary to appropriately release the financial power of local governments,broaden the local tax base,and increase local government revenue.The third is to establish an effective monitoring mechanism to avoid the risk of debt accumulation in areas with high debt ratio from being transmitted to the financial system,and at the same time strengthen the supervision of financial institutions.Fourth,it is necessary to promote the coordinated development of regions and the upgrading of industrial structure,and enhance regional anti-risk capabilities.