The concept of market-based fiscal discipline posits that a government which runs persistent, excessive fiscal deficits will face an increased cost of borrowing and eventually, a reduced availability of credit, and that these market actions will provide an incentive to correct irresponsible...

This paper presents new evidence on the effect of state fiscal institutions, particularly balanced-budget rules and restrictions on state debt issuance, on the yields on state general obligation bonds. We analyze information from the Chubb Relative Value Survey, which contains relative...

For over two centuries, the municipal bond market has been a source of systemic risk, which returned early in the Covid-19 downturn when borrowing from securities markets became costly for many private and public entities, and some found it difficult to borrow at all. Indeed, just before the Fed...

Green municipal bonds are a growing segment of the US municipal bond market. As they face increasing demand, there have been questions about the performance of green muni bonds relative to their conventional counterparts. In this paper, we perform yield curve analysis on a selection of...

Credit rating agencies implemented a "dual ratings system" under which US municipal bond issuers are assessed more harshly that other types of issuers. This system created an artificial demand for bond insurance because the so-called monoline bond insurers were rated more leniently than the...

We investigate how political uncertainty around U.S. gubernatorial elections affects local government borrowing costs. Municipal bond yields sharply increase by 7 basis points before an election and reverse afterward. This political risk premium is higher during economic downturns and close...

We examine the impact of population aging on municipal access to credit. A one standard deviation increase in a state's population age leads to a 23 basis point increase in municipal bond issue spread. Three mechanisms drive this effect: income tax revenue, healthcare liabilities, and pension...