Chen, Jingzhu;
(2023)
Financial Development, Public Debt and Economic Growth.
Doctoral thesis (Ph.D), UCL (University College London).
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Abstract
This thesis consists of three essays that centre on the finance-growth nexus from a macroeconomic to microeconomic perspective. Chapter 1 focuses on China and explores the finance-growth relationship at the local level. It uses a sample of 275 Chinese cities during 2009-2018. This chapter constructs a comprehensive financial depth index which measures the level of bank loans to enterprises and households by excluding bank loans to local governments through local government financing vehicles (LGFVs). Financial deepening in the form of a higher loan-to-GDP ratio is found to lead to lower economic growth. This negative relationship may be caused by the lending discrimination of China’s state-ruled banking system, housing market bubbles and the unbalanced growth between real and financial sectors. Using a sample of Chinese listed firms, Chapter 2 empirically examines the effect of local government debt expansions on firm financing structure after the large fiscal stimulus program in late 2008. We find that an increase in local government debt significantly crowded out firms’ short-term debt, but crowded in long-term debt. We also find that state-owned enterprises (SOEs) are less sensitive to the crowding-out effect. To identify the different responses of SOEs and non-SOEs to the crowding-out effect, we use two external policies---- the 2019 local government financing relaxation program and the 2016 deleveraging reform--- as two quasi-natural experiments. Chapter 3 examines the role of macroprudential policies in shaping the finance-growth relationship. It distinguishes the effect of macroprudential policies in the short- and long-run. We find that, in the long run, the growth-enhancing effect of financial development (i.e. measured by private credit-to-GDP ratio) has deteriorated significantly in both emerging and advanced countries during 2000-2017. This negative finance-growth relationship can be mitigated by macroprudential policies. To account for endogeneity, the standard system generalised methods of moments (GMM) methodology is employed.
| Type: | Thesis (Doctoral) |
|---|---|
| Qualification: | Ph.D |
| Title: | Financial Development, Public Debt and Economic Growth |
| Open access status: | An open access version is available from UCL Discovery |
| Language: | English |
| Additional information: | Copyright © The Author 2022. Original content in this thesis is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International (CC BY-NC 4.0) Licence (https://creativecommons.org/licenses/by-nc/4.0/). Any third-party copyright material present remains the property of its respective owner(s) and is licensed under its existing terms. Access may initially be restricted at the author’s request. |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > SSEES |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10168939 |
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