Impact of China’s Provincial Government Debt on Economic Growth and Sustainable Development

Wanping Yang, Zhenya Zhang, Yajuan Wang, Peidong Deng and Luyao Guo
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Wanping Yang: School of Economics and Finance, Xi’an Jiaotong University, Xi’an 710049, China
Zhenya Zhang: School of Economics and Finance, Xi’an Jiaotong University, Xi’an 710049, China
Yajuan Wang: School of Management, FuDan University, Shanghai 200433, China
Peidong Deng: School of Economics and Finance, Xi’an Jiaotong University, Xi’an 710049, China
Luyao Guo: School of Economics and Finance, Xi’an Jiaotong University, Xi’an 710049, China

Sustainability, 2022, vol. 14, issue 3, 1-21

Abstract: Macroeconomic stability is the core concept of sustainable development. However, the coronavirus disease (COVID-19) pandemic has caused government debt problems worldwide. In this context, it is of practical significance to study the impact of government debt on economic growth and fluctuations. Based on panel data of 30 provinces in China from 2012 to 2019, we used the Mann–Kendall method and Kernel Density estimation to analyze the temporal and spatial evolution of China’s provincial government debt ratio and adopted a panel model and HP filtering method to study the impact of provincial government debt on economic growth and fluctuation. Our findings indicate that, during the sample period, China’s provincial government debt promoted economic growth and the regression coefficient (0.024) was significant. From different regional perspectives, the promotion effect of the central region (0.027) is higher than that of the eastern (0.020) and western regions (0.023). There is a nonlinear relationship between China’s provincial government debt and economic growth, showing an inverted “U-shaped” curve. Fluctuations in government debt aggravate economic volatility, with a coefficient of 0.009; tax burden fluctuation and population growth rate aggravate economic changes. In contrast, the optimization of the province’s industrial structure and the improvement of the opening level of provinces slow down economic fluctuations.

Keywords: local government debt; economic growth; economic fluctuation; sustainable debt management; COVID-19 (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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