The Fiscal Effects of the Covid-19 Pandemic on Cities

Chernick, Howard; Copeland, David A.; Reschovsky, Andrew

doi:10.17310/ntj.2020.3.04

Cited by 64 publications

(46 citation statements)

References 7 publications

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“…The preferred approach for projecting shortfalls makes use of forecasts for macroeconomic variables that are reasonably close proxies for major revenue bases. This is the approach taken in Clemens and Veuger (2020a;), Whitaker (2020a, Auerbach et al (2020), andChernick et al (2020).…”

Section: State and Local Government Budgets During The Covid-19 Crisismentioning

confidence: 99%

Medicaid and fiscal federalism during the COVID‐19 pandemic

Clemens

Ippolito

Veuger

2021

Public Budgeting & Finance

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We thank Philip Hoxie for excellent research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

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Section: State and Local Government Budgets During The Covid-19 Crisismentioning

confidence: 99%

Medicaid and fiscal federalism during the COVID‐19 pandemic

Clemens

Ippolito

Veuger

2021

Public Budgeting & Finance

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“…3 As discussed in Appendix A, one lesson from the Great Depression is that distress in the municipal bond market 1 Clemens and Veuger (2020) estimate that the pandemic will reduce state revenues by an average of 11.5 percent, translating into about ½ percentage point of GDP. Chernick, Copeland, and Reschovsky (2020) estimate that 2020 revenue losses for 150 largest cities would range from 5.5 in a less severe scenario to 9 percent in a more severe one. 2 Haughwout, Hyman, and Lieber (2020) note that state and local governments accounted for 8.5 percent of GDP in 2019, which was higher than the 3.8 percent of GDP from final purchases of the federal government.…”

mentioning

confidence: 99%

How the New Fed Municipal Bond Facility Capped Muni-Treasury Yield Spreads in the Covid-19 Recession

Bordo

Duca

2021

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For over two centuries, the municipal bond market has been a source of systemic risk, which returned early in the COVID-19 downturn when borrowing from securities markets became costly for many private and public entities, and some found it difficult to borrow at all. Indeed, just before the Fed announced its unprecedented intervention into the municipal (muni) bond market, spreads of muni over Treasury yields rose in line with the unemployment rate and appeared headed to levels not seen since the Great Depression, when real municipal gross investment plunged 35 percent below 1929 levels. To prevent a repeat, the Fed created the Municipal Liquidity Facility (MLF) to purchase newly issued, (near) investment grade state and local government bonds at normal ratings-based interest rate spreads over Treasury bonds plus a fee of 100 basis points, later reduced to 50 basis points. Despite a modest take-up, the MLF has effectively capped muni spreads at near normal levels plus the Fed fee and limited the extent to which interest rate spreads could have amplified the impact of the COVID pandemic. To establish the MLF the Fed needed Treasury indemnification against default losses. There are concerns about whether the creation of the MLF could undermine the efficiency of the bond market if the facility lasts too long and could induce moral hazard among borrowers. How the MLF will be unwound will affect these downside aspects and help answer the question whether the program's benefits exceed its costs.

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“…Clemens and Veuger (2020) estimate that the pandemic will reduce state revenues by an average of 11.5 percent, translating into about ½ percentage point of GDP Chernick, Copeland, and Reschovsky (2020). estimate that 2020 revenue losses for 150 largest cities would range from 5.5 in a less severe scenario to 9 percent in a more severe one.2 Haughwout, Hyman, and Lieber (2020) note that state and local governments accounted for 8.5 percent of GDP in 2019, which was higher than the 3.8 percent of GDP from final purchases of the federal government.…”

mentioning

confidence: 99%

How the New Fed Municipal Bond Facility Capped Muni-Treasury Yield Spreads in the Covid-19 Recession

Bordo¹,

Duca²

2021

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, and seminar participants at the Federal Reserve Bank of Dallas for comments, input, and suggestions. Any remaining errors are those of the authors. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

show abstract

The Fiscal Effects of the Covid-19 Pandemic on Cities

Cited by 64 publications

References 7 publications

Medicaid and fiscal federalism during the COVID‐19 pandemic

Medicaid and fiscal federalism during the COVID‐19 pandemic

How the New Fed Municipal Bond Facility Capped Muni-Treasury Yield Spreads in the Covid-19 Recession

How the New Fed Municipal Bond Facility Capped Muni-Treasury Yield Spreads in the Covid-19 Recession

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