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Emerging research issues in subnational government debt management

In: Research Handbook on Public Financial Management

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  • Dario Cestau

Abstract

Between 2006 and 2018, states and local governments in the US financed over 70 percent of the nation’s infrastructure through municipal bond issues. More than 400 billion dollars are raised every year, and the need for new capital is expected to grow significantly in the near future to compensate for years of underinvestment in infrastructure. For decades, this market has been a synonym of extraordinary credit stability and low default rates. However, the sector faces unprecedented challenges due to the health and economic crisis prompted by the coronavirus and climate change. The effective functioning of this market is therefore crucial for financing the provision of public services and local economies. This chapter reviews the most recent literature on the causes and consequences of high credit risk and liquidity premiums in the municipal bond market. It also examines how the different legal structures that back municipal bonds affect credit risk.

Suggested Citation

  • Dario Cestau, 2023. "Emerging research issues in subnational government debt management," Chapters, in: Komla Dzigbede & W. B. Hildreth (ed.), Research Handbook on Public Financial Management, chapter 16, pages 287-299, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:20388_16
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    File URL: https://www.elgaronline.com/doi/10.4337/9781800379718.00030
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