A Study of the Impact of Financial Expansion on Regional Indebtedness

Jianyuan Qu

doi:10.54691/bcpbm.v49i.5472

Authors

Jianyuan Qu

DOI:

https://doi.org/10.54691/bcpbm.v49i.5472

Keywords:

Financial Expansion; Regional Indebtedness; Industrial Expansion; U-shaped Relationship; Two-way Fixed Effects Model.

Abstract

This study examines the impact of financial expansion degree on regional liabilities, selects panel data from 30 Chinese provinces and regions from 2004 to 2020, measures the data with a two-way fixed-effects model, examines heterogeneity and moderating effects among regions, and empirically tests the relationship between the two major variables. The study found a U-shaped relationship between financial expansion and regional indebtedness for the country as a whole, developed and less developed regions, with developed regions having an inverted U-shaped relationship and less developed regions having a positive U-shaped relationship. Changes in financial expansion affect the magnitude of regional indebtedness and have a significant moderating effect on the relationship between the main variables. Regions with a higher degree of industrial expansion have more sensitive indebtedness to financial expansion changes. Based on the study's findings, this article makes significant value suggestions for regional government policies on using financial sector financing to drive economic development based on regional development.

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