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An Empirical Note on Income Tax Evasion Behavior and the Real Interest Rate Yield on Municipal Bonds

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  • Cebula, Richard J.

Abstract

This exploratory note investigate the impact of the aggregate degree of federal personal income tax evasion on the ex post real interest rate yield on high grade municipal bonds. Several financial-market, economic, and statutory control variables are included in the system. Empirical estimation for the 1973-2012 study period leads to the preliminary conclusion that the ex post real interest rate yield on high grade tax-free municipal bonds is an increasing function of the aggregate degree of federal personal income tax evasion, implying that a higher degree of income tax evasion acts to raise the real cost of borrowing to cities, counties, and states and thereby acts to adversely affect the pace (and perhaps the geographic pattern) of urban and regional development across the U.S.

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  • Cebula, Richard J., 2018. "An Empirical Note on Income Tax Evasion Behavior and the Real Interest Rate Yield on Municipal Bonds," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 48(2), January.
    • Handle: RePEc:ags:jrapmc:339905
    DOI: 10.22004/ag.econ.339905
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    1. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    2. Richard J. Cebula, 2014. "An exploratory analysis of the impact of budget deficits and other factors on the ex post real interest rate yield on tax-free municipal bonds in the United States," Applied Financial Economics, Taylor & Francis Journals, vol. 24(19), pages 1297-1302, October.
    3. Hoelscher, Gregory, 1986. "New Evidence on Deficits and Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(1), pages 1-17, February.
    4. William Gissy, 1999. "Net treasury borrowing and interest-rate changes," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 23(1), pages 23-29, March.
    5. James R. Barth & George Iden & Frank S. Russek, 1984. "Do Federal Deficits Really Matter?," Contemporary Economic Policy, Western Economic Association International, vol. 3(1), pages 79-95, September.
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