How does China’s New Budget Law affect the pricing of Local Government Bonds?

Date

2022-01-19

Advisors

Journal Title

Journal ISSN

ISSN

Volume Title

Publisher

Taylor and Francis

Type

Article

Peer reviewed

Yes

Abstract

This article examines the impact of China’s New Budget Law implementation on the pricing of Local Government Bonds (LGBs). We collect 5,442 province-year LGBs observations from 2009 to 2019 and estimate the Simultaneous Equation Models that consider the endogeneity of fiscal transparency. Our results show that the enforcement of the New Budget Law unexpectedly leads to a rise in the interest rates of LGBs overall while enhancing the fiscal transparency of local governments. The findings in this paper suggest that the marketization level of LGBs’ pricing in China needs to be further improved.

Description

The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.

Keywords

China, New Budget Law, Local Government Bonds, Fiscal Transparency

Citation

Bo, L., Yao, H., Mear, F. and Zhang, W. (2022) How does China’s new budget law affect the pricing of local government bonds?, Applied Economics Letters,

Rights

Research Institute

Finance and Banking Research Group (FiBRe)