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Municipal Bond Markets

Author

Listed:
  • Cestau, Dario
  • Hollifield, Burton
  • Li, Dan
  • Schürhoff, Norman

Abstract

The effective functioning of the municipal bond market is crucial for the provision of public services, as it is the largest capital market for state and municipal issuers. Prior research has documented tax, credit, liquidity, and segmentation effects in municipal bonds. Recent regulatory initiatives to improve transparency have made granular trade data available to researchers, rendering it a natural laboratory to study financial intermediation, asset pricing in decentralized markets, and local public finance. Trade-by-trade studies have found large trading costs, contemporaneous price dispersion and other deviations from the law-of-one- price. More research is required to understand optimal market design and the impact of post-crisis regulation, sustainability, and financial technology.

Suggested Citation

  • Cestau, Dario & Hollifield, Burton & Li, Dan & Schürhoff, Norman, 2018. "Municipal Bond Markets," CEPR Discussion Papers 13301, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:13301
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    centrality premium; electronification; green bonds; muni-bond puzzle; Municipal Bonds; Over-the-counter markets; trading cost;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H6 - Public Economics - - National Budget, Deficit, and Debt
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations

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