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Demographic shifts and the strategic use of flexible off-budget debt tools

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  • Jiang, Tianyuan
  • Zhang, Manling
  • Chen, Jing

Abstract

Demographic shifts pose significant fiscal challenges for local governments worldwide. This paper examines how municipal corporate bonds (MCBs), a flexible and off-budget financing solution, help address financing gaps caused by demographic shifts. Using location-based service data and an IV approach, we identify a causal effect of net population change on MCB issuance. We find that growing cities increase MCB issuance in response to population influx, but this pattern is absent in shrinking cities. In addition, the relationship weakens under stricter central government debt policies. Our findings reveal how demographic shifts and regulatory environments jointly shape municipal financing behaviors.

Suggested Citation

  • Jiang, Tianyuan & Zhang, Manling & Chen, Jing, 2025. "Demographic shifts and the strategic use of flexible off-budget debt tools," Emerging Markets Review, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:ememar:v:66:y:2025:i:c:s1566014125000329
    DOI: 10.1016/j.ememar.2025.101283
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    Keywords

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    JEL classification:

    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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