The Impact of Fiscal Governance on Bond Markets: Evidence from Late Budgets and State Government Borrowing Costs

Publikation: Working paperForskning


  • Wp-10-11

    Forlagets udgivne version, 348 KB, PDF-dokument

Does fiscal governance affect government borrowing costs? We operationalize fiscal governance as the ability of governments to pass a budget on time and, using a unique data set on budget enactment dates, analyze the effect of such late budgets on government bond yield spreads. Based on a sample of 36 US states in the period 1988-1997, we estimate that a budget delay of 30 days has a long run impact on the yield spread between 2 and 10 basis points. States with sufficient liquidity in the form of large reserves face small or no costs from late budgets.
UdgiverDepartment of Economics, University of Copenhagen
Antal sider22
StatusUdgivet - 2010

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JEL classification: H72, H61, H63

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