Managing a Buy‐Side Municipal Bond Research Department

Ciccarone, Richard A.

doi:10.1002/9781119198093.ch46

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2022

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“…However, Canuto and Liu [1] noted the growing importance of subnational debt and the need to assess its sustainability. Accordingly, many studies began to investigate subnational debt sustainability at the state level [16][17][18] and municipal level [19,20].…”

Section: Introductionmentioning

confidence: 99%

The Sustainability of Mexican Municipal Public Debt

2022

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This paper examines the sustainability of subnational governments in Mexico, focusing on its top 110 most indebted municipalities. We employ dynamic panel data techniques to assess whether municipal debt remained sustainable during 2007–2017. Our study finds that the subnational fiscal position of Mexican municipalities remains sustainable despite the rapid growth of public debt following the 2008 global financial crisis. However, using Monte Carlo simulations, we show that random disturbances can significantly impact municipal governments’ debt, deteriorating governments’ finances after the shocks materialize.

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