Are there Spillover Effects From Munis?
This paper studies the spillover effects both within the bond markets for individual U.S. states and between the latter and the market for U.S. Treasury securities. We perform the Forbes and Rigobon (2002) spillover test using daily bond yield data over the period 2005 to 2011. Results are twofold. First, we find that between most markets for individual U.S. state bonds there are negative spillovers. In other words, an increase in borrowing costs in one U.S. state results in better borrowing conditions for other states. Second, we find no substantial spillover effect between shocks originating from state securities and from federal markets, except for a few large issuers. Using causality tests in the frequency domain, we find that the Treasury bond market directly causes changes in the markets for municipal bonds in both the short and long run. There is also some evidence of causality from the municipal to the Treasury bond market, but only of a long-run nature. Our results shed some light on the policy debate on the nature of spillover effects within fiscal unions.
|Date of creation:||01 Dec 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htmEmail:
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mardi Dungey & Renee Fry & Vance Martin & Brenda GonzÃ¡lez-Hermosillo, 2004.
"Empirical Modeling of Contagion; A Review of Methodologies,"
IMF Working Papers
04/78, International Monetary Fund.
- Mardi Dungey & Renee Fry & Brenda Gonzalez-Hermosillo & Vance Martin, 2005. "Empirical modelling of contagion: a review of methodologies," Quantitative Finance, Taylor & Francis Journals, vol. 5(1), pages 9-24.
- Martin, V. & Dungey & M., 2004. "Empirical Modelling of Contagion: A Review of Methodologies," Econometric Society 2004 Far Eastern Meetings 574, Econometric Society.
- Vance L. Martin & Brenda Gonzalez-Hermosillo, & Mardi Dungey & Renee A. Fry, 2004. "Empirical Modelling of Contagion: A Review of Methodologies," Econometric Society 2004 Australasian Meetings 243, Econometric Society.
- Breitung, Jorg & Candelon, Bertrand, 2006. "Testing for short- and long-run causality: A frequency-domain approach," Journal of Econometrics, Elsevier, vol. 132(2), pages 363-378, June.
- Taimur Baig & Ilan Goldfajn, 1999.
"Financial Market Contagion in the Asian Crisis,"
IMF Staff Papers,
Palgrave Macmillan, vol. 46(2), pages 3.
- Andrew Ang & Francis A. Longstaff, 2011.
"Systemic Sovereign Credit Risk: Lessons from the U.S. and Europe,"
NBER Working Papers
16982, National Bureau of Economic Research, Inc.
- Ang, Andrew & Longstaff, Francis A., 2013. "Systemic sovereign credit risk: Lessons from the U.S. and Europe," Journal of Monetary Economics, Elsevier, vol. 60(5), pages 493-510.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:11/290. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.