Digital Finance, Fiscal Transparency and Government Debt Risk

Abstract

The expansion of the breadth of coverage and depth of use of digital finance greatly improves the efficiency of financial services to the real economy, and has an important impact on the economic development of local governments in China. This paper takes the provincial local government debt risk data from 2011 to 2020 as the research sample to deeply investigate the effect and mechanism of digital finance on local government debt risk. The results show that, firstly, digital finance can effectively suppress local government debt risk, and a significant long-term suppressive effect is found by quantile model test. Secondly, in the mechanism of action test, digital finance effectively alleviates local government debt risk through the path of local government fiscal transparency, and has played a significant regulating effect. Finally, based on different regions and development levels, the effect of digital finance on local government debt risk is found to be more significant in eastern regions and regions with high urbanization levels. The findings of this paper provide some theoretical value and practical significance for preventing the occurrence of local government debt risk and regional systemic risk.

Keywords

• digital finance; fiscal transparency; government debt risk; mediating effect; moderating effect
• mediating effect; moderating effect