The economic effects of public financing: Evidence from municipal bond ratings recalibration
Journal Article (Journal Article)
We show that municipalities' financial constraints can have a significant impact on local employment and growth. We identify these effects by exploiting exogenous upgrades in U.S. municipal bond ratings caused by Moody's recalibration of its ratings scale in 2010. We find that local governments increase expenditures because their debt capacity expands following arating upgrade. These expenditures have an estimated local income multiplier of 1.9 and a cost per job of $20,000 per year. Our findings suggest that debt-financed increases in government spending can improve economic conditions during recessions.
Full Text
Duke Authors
Cited Authors
- Adelino, M; Cunha, I; Ferreira, MA
Published Date
- September 1, 2017
Published In
Volume / Issue
- 30 / 9
Start / End Page
- 3223 - 3268
Electronic International Standard Serial Number (EISSN)
- 1465-7368
International Standard Serial Number (ISSN)
- 0893-9454
Digital Object Identifier (DOI)
- 10.1093/rfs/hhx049
Citation Source
- Scopus