Bank-Government Relationship,Local Government Bond Investor Structure and Effectiveness of Proactive Fiscal Policy
In recent years,how to further improve the effectiveness of China's fiscal policy has attracted much attention.As the main holder of local government bonds,the bank-government relationship between commercial banks and local governments has an important impact on the effectiveness of fiscal policy.Clarifying its impact and mechanism will help to further improve the effectiveness of China's macroeconomic governance.By constructing a four-sector dynamic stochastic general equilibrium model with financial friction,this paper studies the impact and mechanism of bank-government relationship on the effectiveness of fiscal policy,and analyzes the impact of bond investor structure changes on this relationship.It is found that the bank-government relationship has distorted incentive effect and regulatory effect,which reduces the financing cost of local governments,but also leads to the increase of risk of commercial banks and the crowding out of private investment,thus weakening the effectiveness of fiscal policy.The diversification of bond investor structure helps to alleviate the negative impact of bank-government relationship on the effectiveness of fiscal policy,and plays a positive role in the dual dimensions of steady growth and risk prevention.This paper argues that local governments and commercial banks should reasonably balance the relationship between banks and governments,further strengthen bank supervision,improve banks'risk management capabilities,and prevent moral hazard and credit risk caused by the relationship between banks and governments;at the same time,we should speed up the process of bond marketization reform,gradually establish a normalized mechanism for local debt over-the-counter issuance,enrich the structure of bond investors,and steadily promote the supervision of local government debt consolidation.
Bank-Government RelationshipLocal Treasury BondsEffectiveness of Proactive Fiscal PolicyDynamic Stochastic General Equilibrium
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