The effective functioning of the municipal bond market is crucial for the provision of public services, as it is the largest capital market for state and municipal issuers. Prior research has documented tax, credit, liquidity, and segmentation effects in municipal bonds. Recent regulatory...

Traditional liquidity measures can provide a false impression of the liquidity and stability of financial market trading. Using data on auctions (bids wanted in competition; BWICs) from the collateralized loan obligation (CLO) market, we show that a standard measure of liquidity, the effective...

In a dynamic model of optimal bailouts, we show how borrower myopia affects the severity of debt crises. Myopic borrowers misprice the option to default with a U-shaped negative pricing error. The myopia discount changes the optimal bailout policy. Myopia gets punished when the distortions from...