The Digital Economy and Local Government Financing Costs in China – Evidence from Urban Investment Bond Issuance Rates

The yield of urban investment bonds directly affects local governments' financing costs, thereby influencing fiscal sustainability. As an emerging economic paradigm, the digital economy may exert significant effects on regional urban investment bond spreads. In this context,this paper investigates effect of regional digital economy on urban investment bond risk premium .We collected more than 16,000 bond yield data from 2015 to 2022 and conduct empirical study through the method of fixed effect regression model and quantile regression model. The results are as follows:(1)Development of the digital economy has a significant negative impact on the issuance spread of urban investment bonds. (2) digital economy reduces the risk premium of urban investment bonds mainly by increasing the credit rating of urban investment platforms and the fiscal transparency of local governments. (3)The negative impact of the digital economy on the risk premium of urban investment bonds is more pronounced in the central and eastern regions of China.(4) Quantile regression shows that the impact of the digital economy on the risk premium of urban investment bonds is greater as the issuance yield of urban investment bonds increases.