Sub-National Credit Risk and Sovereign Bailouts: Who Pays the Premium?

Jenkner, Eva; Lu, Zhongjin

doi:10.2139/ssrn.2398821

Cited by 2 publications

(1 citation statement)

References 14 publications

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“…Matz and Mitze (2015) [7] showed a link between regional public debt and economic growth for German federal states. Further, Jenkner and Lu (2014) [8] and Buiatti, Carmeci, and Mauro (2014) [9] provided empirical evidence that regional fiscal imbalance influences public debt at a national level.…”

Section: Introductionmentioning

confidence: 99%

Is the public sector of your country a diffusion borrower? Empirical evidence from Brazil

Rocha¹,

Rocha

Souza³

2017

PLoS ONE

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We propose a diffusion process to describe the global dynamic evolution of credit operations at a national level given observed operations at a subnational level in a sovereign country. Empirical analysis with a unique dataset from Brazilian federate constituents supports the conclusions. Despite the heterogeneity observed in credit operations at a subnational level, the aggregated dynamics at a national level were accurately described by the proposed model. Results may guide management of public finances, particularly debt manager authorities in charge of reaching surplus targets.

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Section: Introductionmentioning

confidence: 99%

Is the public sector of your country a diffusion borrower? Empirical evidence from Brazil

Rocha¹,

Rocha

Souza³

2017

PLoS ONE

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Impact of Bankruptcy Eligibility Requirements and Statutory Liens on Borrowing Costs

Moldogaziev¹,

Kioko²,

Hildreth³

2017

Public Budgeting & Finance

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While bankruptcy protection remains an instrument of last resort, a recent wave of petitions has aroused the interest of key participants in the municipal bond market. To date, 12 states unconditionally authorize municipalities to file for bankruptcy protection, 15 states require that municipalities satisfy certain threshold requirements, while the remaining 23 states either explicitly prohibit or have not specifically provided this authority to municipal governments. As bankruptcy protection rules influence bondholder risk exposures, we empirically test the significance of the state‐specific bankruptcy eligibility requirements on borrowing costs. In a representative sample of general obligation bonds, empirical results suggest that municipalities eligible to file for bankruptcy protection pay a premium. The premium is higher if issuers are unconditionally authorized to file for bankruptcy protection, especially for debt with longer maturities. Findings also show that there are benefits associated with statutory liens; however, these benefits diminish with maturity.

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Sub-National Credit Risk and Sovereign Bailouts: Who Pays the Premium?

Cited by 2 publications

References 14 publications

Is the public sector of your country a diffusion borrower? Empirical evidence from Brazil

Is the public sector of your country a diffusion borrower? Empirical evidence from Brazil

Impact of Bankruptcy Eligibility Requirements and Statutory Liens on Borrowing Costs

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