Local governments in Japan account for about 80 per cent of general government spending when excluding social security expenditures. Therefore, for the implementation of fiscal policy it is important how local governments will behave. On the basis of the economic theories on fiscal federalism it...

We show that state corruption and political connections have strong effects on municipal bond sales and underwriting. Higher state corruption is associated with greater credit risk and higher bond yields. Corrupt states can eliminate the corruption yield penalty by purchasing credit...