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Market Responses To Voter-Approved Debt

Author

Listed:
  • Jinhai Yu
  • Xin Chen
  • Mark D. Robbins

Abstract

US local governments often seek voter approval through bond referenda prior to borrowing. Passing bond referenda increases borrowing authority and potential debt levels, which can influence government credit risk. Focusing on Texas local governments, we estimate the causal effects of bond authorization on credit risk with a regression discontinuity design. Credit risk is measured by the average bond yields of existing debt. For school districts, one standard deviation increase in authorized debt per capita causes bond yields to increase by approximately 9.9–22.5 basis points in the subsequent 12 months. We find no effects for cities and counties.

Suggested Citation

  • Jinhai Yu & Xin Chen & Mark D. Robbins, 2022. "Market Responses To Voter-Approved Debt," National Tax Journal, University of Chicago Press, vol. 75(1), pages 93-119.
  • Handle: RePEc:ucp:nattax:doi:10.1086/716770
    DOI: 10.1086/716770
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    Cited by:

    1. Daniel Garrett & Ivan T. Ivanov, 2023. "Gas Guns and Governments: Financial Costs of Anti-ESG Policies," Working Paper Series WP 2023-07, Federal Reserve Bank of Chicago.

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