LV Jian:Has Shadow Banking Prompted the Growth of Local Government Debt?

Abstract  According to local government debt theory, spatial economics, and Chinas realities, this paper, based on estimating size of local government debt and shadow banking, empirically analyzes if shadow banking prompts the growth of local government debt by using Dynamic Spatial Durbin Model. Study results show that the development of shadow banking strongly prompts the growth of debt and the biggest boost in the western region, followed by central region, but has no significant influence in eastern region. Growths of debt have strong inertia in provinces except for central region. Economic growth can significantly drive debt growth, and GDP tournament is being held. Debts are promoted by urbanization in central and western regions. Foreign trade has a negative impact on the local government debt, but the proportion of second industry has a positive effect except western region.

Key words： Local Government Debt      Shadow Banking      Size Estimating      Dynamic Spatial Durbin Model

Source: Finance & Trade Economics , No.8, 2014