Fiscal Transparency and Local Government Debt: An Empirical Study Based on Provincial Panel Data

Along with China's economy entering a period of "new normal", the problem of local governments' debt risks has become increasingly prominent. How to curb the excessive expansion of local government debt has become an issue in need of urgent attention and solution. Based on the panel data at the provincial level in China from 2008 to 2016, a random effect model and a system GMM model were used to empirically test the impact of fiscal transparency on the debt level of local government. The analysis results show that there is an inverted U-shaped relationship between fiscal transparency and debt level (measured by per capita debt and debt rate), and the inflection point of this relationship occurs when the fiscal transparency score is between 41 and 44. Therefore, local governments must further improve the level and quality of financial information disclosure and strengthen public supervision of government financial behaviors, so as to effectively control the expansion and reduce the risk of government debts.