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U.S. municipal yields and unfunded state pension liabilities

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  • Lekniūtė, Zina
  • Beetsma, Roel
  • Ponds, Eduard

Abstract

We present empirical evidence that municipal bond yields are increasing in both the explicit debt and the unfunded pension liabilities of U.S. state civil servants. However, the positive yield effects of both types of debt are found only for the period since the start of the global financial crisis. A potential explanation is that the crisis triggered awareness of budgetary sustainability. Further, the marginal yield effect of higher pension debt is significantly smaller than that of higher explicit debt.

Suggested Citation

  • Lekniūtė, Zina & Beetsma, Roel & Ponds, Eduard, 2019. "U.S. municipal yields and unfunded state pension liabilities," Journal of Empirical Finance, Elsevier, vol. 53(C), pages 15-32.
    • Handle: RePEc:eee:empfin:v:53:y:2019:i:c:p:15-32
    DOI: 10.1016/j.jempfin.2019.05.003
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    Cited by:

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    2. Nakhmurina, Anya, 2018. "Does Fiscal Monitoring Make Better Governments? Evidence from US Municipalities," Working Papers 284, The University of Chicago Booth School of Business, George J. Stigler Center for the Study of the Economy and the State.
    3. Mark J. Garmaise & Gabriel Natividad, 2024. "Fiscal windfalls and entrepreneurship: fostering entry or promoting incumbents?," Small Business Economics, Springer, vol. 62(1), pages 133-158, January.

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    More about this item

    Keywords

    Civil servants pension funds; Underfunding; Explicit debt; Implicit debt; Municipal yields; Unfunded pension liabilities; Market values; Actuarial values;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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