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Man Zhang, Xiaowei Huang, Terence tai-leung Chong and Liping Lu
''Do Treasury Bonds Crowd Out Local Government Bonds in China?''
The excessive issuance of local government bonds poses a tremendous risk to the financial stability in China. Using a provincial data set covering the period from 2009 to 2019, we find that the issuance of local government bonds is negatively associated with that of treasury bonds. We uncover the conditions for treasury bonds to crowd out the local government bonds. This effect is more pronounced in provinces with fewer local government bonds, lower fiscal deficit ratio, larger GDP size, and higher GDP growth rate, as well as on local government financing vehicle (LGFV) bonds with higher credit ratings.
Keywords: Treasury Bond, Crowding Out, Local Government Bond
JEL: H7 - State and Local Government; Intergovernmental Relations: General
H6 - National Budget, Deficit, and Debt: General
Manuscript Received : Sep 06 2021 Manuscript Accepted : Sep 06 2021

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