Abstract This paper examines and confirms the existence of the local government debt accelerator, based on panel VAR model and a new database of municipal investment bonds issued by prefecture-level cities in China. Since local government uses land revenue as collateral to issue bonds,an increase of land revenue will lead to a debt expansion by relaxing local government’s credit constraint. Due to the fact that these bonds are issued to invest in infrastructure projects, the local government debt expansion can produce output fluctuation. Regional competition serves as a powerful incentive behind this process. The local government debt accelerator extends the financial accelerator theory by emphasizing the importance of local government’s behavior in China. Meanwhile, it reveals the nexus of local government debt and land finance, it also includes possible risk transmission channels.
GAO Ran,GONG Liu-tang. Does the Local Government Debt Accelerator Exist? —An Empirical Analysis Based on Panel VAR Model. Economic Survey, 2019, 36(6): 0149.
2019, Vol. 36 
