UID:
edoccha_9958056961702883
Format:
1 online resource (65 p.)
ISBN:
1-5135-6609-1
,
1-5135-3864-0
Series Statement:
IMF Working Papers
Content:
This paper examines the determinants of sub-national governments risk premia using secondary market data for U.S., Canada, Australia and Germany. It finds that, as for central governments, fiscal fundamentals matter in the pricing of risk premia, and sub-national governments with higher public debt and larger deficits pay higher premia. However, this relationship is not uniform across countries. Market pricing mechanisms are less effective in presence of explicit or implicit guarantees from the central government. Specifically, we show that in pricing risk premia of sub-national governments, markets are less responsive to fiscal fundamental when sub-national governments depend on high transfers from the central government, i.e., when there is some form of implicit guarantee from the center. Using primary market data, the paper also looks at whether transfer dependency from the central government influences sub-national governments’ incentive to access markets. We show that high transfer dependency lowers the probability of sub-national governments to borrow on capital markets.
Note:
Description based upon print version of record.
,
Cover Page; Title Page; Copyright Page; Contents; Tables; Figures; II. Main Characteristics of Sub-National Governments Spreads; 1. Sub-National Government Spreads; 2. Transfer Dependency Across Countries; III. Econometric Model; A. Baseline Model: Explaining Sub-National Governments Spreads; B. System of Equations: Investigating the Common Pool Problem; C. Heckman Selection Model: Investigating Incentives to Issue Bonds; IV. Definitions, Data, and Sources; 1. Summary Statistics; 2. Summary Statistics - Primary Market Bonds and Spreads; V. Results; A. Baseline regression; 3. Baseline Model
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4. Non-Linearities with Fiscal Fundamentals5. Heterogeneity at the Country Level; 6. High and Low Transfer Dependency; 7. Interaction Terms; 3. Interaction Terms; 4. Interaction term with Central Government Growth; B. Transfer Dependency and Budget Balances; 8. System of Equations; 9. Fiscal Reaction Functions; C. Probability of issuance and determinants of risk premia on the primary market; 10. Heckman Selection Model - Issuance and Pricing; VI. Robustness Checks; A. Endogeneity; 11. Controlling for Endogeneity; B. Non-Stationarity; 12. Specification in First Differences
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C. Heterogeneity at the Sub-National Government Level13. Controlling for Heterogeneity; 5. Average Sub-National Spreads by Country During the 2008 Crisis; VII. Conclusions; References; I. Introduction; Footnotes
,
English
Additional Edition:
ISBN 1-5135-1106-8
Language:
English
