Abstract
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.
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