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Shvoong Home>Business & Finance>On Bond-Raising by Local Governments:A Reflection on the Dilemma Caused by Fiscal Policy Review

On Bond-Raising by Local Governments:A Reflection on the Dilemma Caused by Fiscal Policy

Article Review   by:TsingHua     Original Author: The Study of Finance and Economics
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Since 1998,for five years on end there has been drastic government budget deficits, rapid growth of the balance of government bonds, however, the employment of positive fiscal policy hasn't enabled the national economy to recover its comparatively fast growth speed, instead, brought the fiscal policy to into a dilemma. This paper emphasizes on the necessity of issuing local government bonds to sustain the infrastructure investment:which can not only meet the demand of the rising government expenditure and the demand of supporting certain economic growth rate,but also,to some extent, enhance the effectiveness of employing fiscal money.In order to ensure the smooth issuing of the local government bonds, some institutional reform should be done: to perfect the supervising system of government officials; appropriately restrict the issuing of local bonds;build up the guarantee mechanism of repaying debts;normalize the tax system concerning enterprises;reform the revenue and expenditure relations between central government and local government, and define respective responsibilities.
Published: January 03, 2003   
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