Impact of China’s Provincial Government Debt on Economic Growth and Sustainable Development

ABSTRACT

Macroeconomic stability is the core concept of sustainable development. However, the coronavirus disease (COVID-19) pandemic has caused government debt problems worldwide. In this context, it is of practical significance to study the impact of government debt on economic growth and fluctuations. Based on panel data of 30 provinces in China from 2012 to 2019, we used the Mann–Kendall method and Kernel Density estimation to analyze the temporal and spatial evolution of China’s provincial government debt ratio and adopted a panel model and HP filtering method to study the impact of provincial government debt on economic growth and fluctuation. Our findings indicate that, during the sample period, China’s provincial government debt promoted economic growth and the regression coefficient (0.024) was significant. From different regional perspectives, the promotion effect of the central region (0.027) is higher than that of the eastern (0.020) and western regions (0.023). There is a nonlinear relationship between China’s provincial government debt and economic growth, showing an inverted “U-shaped” curve. Fluctuations in government debt aggravate economic volatility, with a coefficient of 0.009;tax burden fluctuation and population growth rate aggravate economic changes. In contrast, the optimization of the province’s industrial structure and the improvement of the opening level of provinces slow down economic fluctuations. © 2022 by the authors. Licensee MDPI, Basel, Switzerland.