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The Economic Effects of Public Financing: Evidence from Municipal Bond Ratings Recalibration

Adelino, Manuel ; Cunha, Igor ; Ferreira, Miguel A.

The Review of financial studies, 2017-09, Vol.30 (9), p.3223-3268 [Periódico revisado por pares]

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Título:
The Economic Effects of Public Financing: Evidence from Municipal Bond Ratings Recalibration
Autor: Adelino, Manuel ; Cunha, Igor ; Ferreira, Miguel A.
Assuntos: Bond ratings ; Economic conditions ; Employment ; Expenditures ; Financing ; Government spending ; Local government ; Multiplier ; Municipal bonds ; Ratings & rankings ; Studies
É parte de: The Review of financial studies, 2017-09, Vol.30 (9), p.3223-3268
Descrição: We show that municipalities' financial constraints can have a significant impact on local employment and growth. We identify these effects by exploiting exogenous upgrades in U.S. municipal bond ratings caused by Moody's recalibration of its ratings scale in 2010. We find that local governments increase expenditures because their debt capacity expands following a rating upgrade. These expenditures have an estimated local income multiplier of 1.9 and a cost per job of $20,000 per year. Our findings suggest that debt-financed increases in government spending can improve economic conditions during recessions.
Editor: Oxford: Oxford University Press for The Society for Financial Studies
Idioma: Inglês

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