This article presents a new, cointegration approach to test a tax arbitrage opportunity in holding municipal bonds. Noticing that the variables of interest are nonstationary, two alternative cointegration tests are used to examine the relationship that may exist (1) between the yield on...

Limited economic resources create constraints that force trade-offs among desired objectives. Likewise, state-balanced budget requirements force policy makers to make budgetary trade-offs among competing state programs. Constrained state resources have also encouraged states to issue bonds to...