This setting lets you change the way you view articles. You can choose to have articles open in a dialog window, a new tab, or directly in the same window.
Open in Dialog
Open in New Tab
Open in same window

American Economic Journal: Economic Policy: Vol. 4 No. 2 (May 2012)

AEJ: Policy Volume. 4, Issue 2 | leftPrevious ArticleNext Articleright

Expand

Quick Tools:

Print Article Summary Email Link to this Article Export Citation
Sign up for Email Alerts Follow us on Twitter Subscription Information
(Institutional Administrator Access)

Explore:

AEJ: Policy - All Issues

AEJ: Policy Forthcoming Articles

Fiscal Imbalances and Borrowing Costs: Evidence from State Investment Losses

Article Citation

Novy-Marx, Robert, and Joshua D. Rauh. 2012. "Fiscal Imbalances and Borrowing Costs: Evidence from State Investment Losses." American Economic Journal: Economic Policy, 4(2): 182-213.

DOI: 10.1257/pol.4.2.182

Abstract

During the last quarter of 2008, financial losses in state pension funds varied from 12 percent to 68 percent of the revenue generated by the state government. We quantify a sovereign default channel in the state municipal market by examining how changes in bond spreads vary with state pension fund losses, controlling for credit ratings and various measures of the state's fiscal strength. Municipal bond spreads rose by 7-15 basis points for each 10 percent of state-generated revenue lost by states in the lower half of the credit quality spectrum. (JEL H71, H72, H74, H75)

Article Full-Text Access

Full-text Article

Additional Materials

Download Data Set (57.98 MB) | Online Appendix (148.20 KB)

Authors

Novy-Marx, Robert (U Rochester)
Rauh, Joshua D. (Northwestern U)

JEL Classifications

H71: State and Local Taxation, Subsidies, and Revenue
H72: State and Local Budget and Expenditures
H74: State and Local Borrowing
H75: State and Local Government: Health; Education; Welfare; Public Pensions

Comments

View Comments on This Article (0) | Login to post a comment


American Economic Journal: Economic Policy



AEA Member Login:


Quick Tools:

Email Link to this Issue

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AEJ: Policy - All Issues

AEJ: Policy - Forthcoming Articles

AEA Journals

Virtual Field Journals

AEAweb | AEA Journals | Contact Us