The Research on the Impact of China’s New Budget Law of the Market Process of Local Government Bonds
Journal of Finance and Accounting
Volume 6, Issue 1, January 2018, Pages: 18-25
Received: Feb. 23, 2018; Published: Feb. 24, 2018
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Authors
Tao Wang, The School of Public Finance and Taxation, Central University of Finance and Economics, Beijing, P. R. China
Zhi-qi Zhu, The School of Economics, Tianjin University of Finance and Economics, Tianjin, P. R. China; Chinese Academy of Fiscal Sciences, Beijing, P. R. China
Ke Gao, The School of Public Finance and Taxation, Central University of Finance and Economics, Beijing, P. R. China
Xiao-jing Hao, The School of Public Finance and Taxation, Central University of Finance and Economics, Beijing, P. R. China
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Abstract
With the implementation of the New Budget Law in 2015, the "front door" for the issuance of local government bonds has been opened and hundreds of local bonds have entered the bond market. However, whether the New Budget Law really enhances the marketability of local government bonds, this has been a common concern of all walks of life. Since there is no discount or premium on the local government bonds issued in China at present, the market-based pricing of the issue interest rate is the main index to measure the degree of marketization of local bonds. This paper firstly summarizes the relevant factors that influence the interest rate of local government bonds under the condition of marketization, and then analyzes the impact of these factors on the interest rate of local bonds around 2015 by means of empirical ways, to determine whether the degree of marketization of local bonds is affected by the New Budget Law. The results of regression analysis show that under the condition of keeping other factors unchanged, the new budget method has a significant positive correlation with the local debt issuance rate as a dummy variable, which shows that the implementation of the new budgeting law has indeed affected the issuance rate of local bonds. In the regression of local bonds issued before and after 2015, comparing local debt bond characteristics variables with local debt issuer characteristic variables, this article finds that except for local bond issuance, other variables are significant in both regression, The effect of local bond issuance on the interest rate of local bonds after the implementation of the New Budget Law becomes significantly positive. This shows that the degree of marketization of local government bonds has been somewhat enhanced after the implementation of the New Budget Law.
Keywords
Local Government Bonds, Marketization of Interest Rates, New Budget Law
To cite this article
Tao Wang, Zhi-qi Zhu, Ke Gao, Xiao-jing Hao, The Research on the Impact of China’s New Budget Law of the Market Process of Local Government Bonds, Journal of Finance and Accounting. Vol. 6, No. 1, 2018, pp. 18-25. doi: 10.11648/j.jfa.20180601.13
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