We examine the role of institutional investors in monetary policy transmission to asset markets by exploiting a discontinuous threshold in the tax treatment of municipal bonds. As bonds approach the threshold, mutual funds, the primary institutional traders in the market, dispose of the bonds at...

We examine recent regulation requiring US municipal governments to disclose private debt. We show that governments fail to disclose 55-80% of reportable debt events and that, conditional on disclosure, filings often omit contract details essential for bond pricing. Non-compliant issuers are also...

This research paper presents and discusses the main results generated and obtained with the proprietary computer platform CIDIUS®, developed by the authors of this work, which aims to support the decision-making process of Portuguese mayors. Thus, keeping in mind the theoretical models and...

This paper explores which variables are more significant in municipal executive recommendation by citizens. We estimated the influence of public dimensions, such as municipe loyalty, municipe satisfaction, and municipe perceived value in municipal executive recommendation by citizens. Then, we...

We examine recent regulation requiring US municipal governments to disclose private debt. We show that governments fail to disclose 55-80% of reportable debt events and that, conditional on disclosure, filings often omit contract details essential for bond pricing. Non-compliant issuers are also...

We hand-collect new data on municipal bonds issued by all states and the largest 100 cities in the U.S. between 1920 and 2020 and study how the terms of municipal bond financing evolved over the last century. We document a striking decline of almost 50% in the maturity of these bonds. We analyze...

Credit ratings are pivotal for municipal bonds as they determine borrowing cost for state and local level governments that are ultimately born by taxpayers. Prior to 2010 credit rating recalibration, municipal bonds were rated by major credit ratings agencies on a separate rating scale that...

In March 2020, the COVID-19 pandemic caused severe financial stress for state and local municipalities. Municipalities' public health responses led to material increases in expenditures. At the same time, many municipalities faced revenue delays and declines due to extended tax deadlines and...

We examine how interstate differences in fiscal rules can help explain the differences in municipal bond returns across US states in a dynamic equilibrium model of municipal credit risk. State governments choose the optimal level of debt and a default policy, taking as given a fiscal rule for...

Saudi Arabia experience structural economic changes embodied by Vision 2030. One of the main aspects of this master plan is related to the financial markets and developing its instruments. This paper is devoted to developing new financial instrument called Municipality Sukuk (MuSk), and bring it...

This paper reveals a non-monotonic impact of local mutual funds on municipal bond issuance. Offering yields are higher in states with open-end municipal bond funds, and with larger aggregate fund size. However, holding local fund size constant, yields are decreasing in the number of funds. Such...

In 2010, the Municipal Securities Rulemaking Board (MSRB) proposed Rule Change SR-MSRB-2010-03 (the Rule Change), which requires a display of municipal bond credit ratings on the EMMA website, a centralized repository of municipal bond information. This Rule Change modestly improved retail...

Municipal bonds exhibit considerable retail pricing variation, even for same-size trades of the same bond on the same day, and even from the same dealer. Markups vary widely across dealers. Trading strongly clusters on eighth price increments, and clustered trades exhibit higher markups. Yields...

Local governments often seek credit ratings from multiple agencies for external financing. Rating shopping and catering, the incentives of the rating agencies, and the career incentives of the analysts issuing the ratings may render the ratings interdependent. This paper estimates the feedback...

We examine recent regulation requiring US municipal governments to disclose private debt. We show that governments fail to disclose 55-80% of reportable debt events and that, conditional on disclosure, filings often omit contract details essential for bond pricing. Non-compliant issuers are also...

Migration patterns in the United States changed dramatically during the COVID-19 pandemic. We find that COVID-induced migration predicts municipal bond yield spreads, particularly for lower-rated bonds and areas experiencing larger than usual population outflows. Analyzing this effect across the...

This paper shows that state tax policy significantly affects the transmission of asset purchase programs into municipal bond prices. I establish theoretically and empirically two parameters that determine prices in the cross section: the tax rates of in-state investors and the aggregate wealth...

This paper shows that climate risk mitigation strategies are priced in financial markets. Using extreme weather and natural capital loss shocks, I demonstrate that the municipal bond market starts to price natural capital following an extreme weather event. The yield spread between counties that...

We investigate the association between a wide range of environmental and social outcomes and the credit risk of municipal finance fixed income securities. Building on recent work documenting the pricing of climate risk, future opioid health care costs and race-based investor preferences at the...

This paper studies the cross-section of expected municipal bond returns. We show that municipal bond yields contain reliable information about differences in expected municipal bond returns across states of issuance, duration range, and credit quality. Hence, using information embedded in those...

Calls for reforming the civil rights enforcement regime often focus on individual government officers. Recent years have brought demands to abolish qualified immunity—a defense that protects individual officers from liability so long as they did not violate clearly established law—and to end...

We analyze the impact of $38 billion of corporate subsidies given by U.S. local governments on their borrowing costs. We find that winning counties experience a 13.6 bps increase in bond yield spread as compared to the losing counties. The increase in yields is higher (16 -- 21 bps) when the...

At the onset of the COVID-19 pandemic, state and local governments were among the sectors expected to experience the most severe distress. The combination of a sharply deteriorating revenue picture, a pressing need for additional expenditures, delays in the receipt of substantial taxes owed, and...

The economics literature lacks articles that provide a broad roadmap-let alone a logical explanation-of the new set of Federal Reserve policy tools that were created to counter the COVID-19 recession. This study provides an overview of the motivation for these new credit-easing programs-namely...

We estimate the option value of municipal liquidity by studying bond market activity and public sector hiring decisions when government budgets are severely distressed. Using a regression discontinuity (RD) design, we exploit lending eligibility population cutoffs introduced by the federal...

Municipal (muni) bonds are an important source of funding for state and local governments. During the Covid-19 pandemic, muni debt markets became severely distressed. In response, the Federal Reserve established the Municipal Liquidity Facility (MLF). Meanwhile, Congress enacted extensive fiscal...

This study examines the pricing of municipal bonds before and after a currency shock in Switzerland. Two approaches are used to decompose the municipal to treasuries bond spreads into liquidity, maturity, and default risk premiums. The first approach is the model of the cross-sectional...

A regulation following from Dodd-Frank prohibits municipal financial advisors from simultaneously acting as municipal bond underwriters. Using a difference-in-differences approach, I test whether this reduction in advisor privileges affects financial advice and bond outcomes. Bonds with...

The alarming rise in drinking water pollution across the U.S. is often attributed to cost cutting pressures faced by local officials. We know little, however, about why these pressures are so severe for some cities compared to others. We present a new theory to argue that an important...

This paper examines the effect of exchange-traded funds' (ETFs) daily holding disclosure on the pre-trade transparency of municipal bond markets. Bonds held by ETFs have significantly smaller price dispersion than similar, non-ETF-held bonds. The effect is stronger for retail trades than for...

I present three findings on the effects of local unions on the municipal bond market. First, public- and private-sector unions play differential roles in capital markets: municipal bond issuers in areas with higher public-sector union density incur higher issuance costs and lower credit ratings....

Municipal bonds are an option available to many cities to rise long-term financing to finance the infrastructure projects. This study aims to develop and find local measures of creditworthiness that are suitable and applicable for local government units in Kurdistan Region of Iraq. Different...

The crisis phenomena in the global and Russian economy directly related to the introduction of quarantine measures in 2020, led to the deficit of the consolidated regional budget. At end-2020, the consolidated regional budget and the budgets of territorial state extra-budgetary funds ran a...

In this article, the authors propose a systematic approach for pricing and trading municipal bonds, leveraging the feature-rich information available at the individual bond level. Based on the proposed pricing framework, they estimate several models using ridge regression and Kalman filtering....

At the onset of the COVID-19 pandemic, state and local governments were among the sectors expected to experience the most severe distress. The combination of a sharply deteriorating revenue picture, a pressing need for additional expenditures, delays in the receipt of substantial taxes owed, and...

Local governments’ bond issues carry information about local macroeconomic outlook that is valuable for firms’ internal human capital allocation. We find that firms increase local employment by 0.14% after a one-standard-deviation increase in a county’s municipal bond issuance. These...

Against the backdrop of COVID-19, we study how the interactions of mutual funds and dealers introduce fragility to the municipal bond market and carry lasting impacts. During the crisis, trading activities surge while dealers' liquidity provision plunges for mutual-fund-held bonds, leading to...

Municipal bond markets experienced a significant amount of strain in response to the COVID-19 crisis, creating liquidity and credit concerns among market participants. During the economic shutdown resulting from the pandemic, income tax revenues were deferred and sales tax revenues decreased...

The municipal bond market is not homogeneous but consists of varying credits supporting different governmental activities. In this paper we discuss how sectors form and how they are differentially subject to market risks, using the COVID-19 pandemic as a case study. The pandemic has disrupted...

We examine the impact of the COVID-19 pandemic and subsequent monetary and fiscal policy actions on municipal bond market pricing. Using high-frequency trading data, we estimate key policy events at the peak of the crisis by focusing on a sample of bonds within a very narrow window of just...