A macroeconomic model for determining yields on municipal bond market for states under u.s. monetary union

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Publication Type dissertation
School or College College of Social & Behavioral Science
Department Economics
Author Raihan, Mahfuz
Title A macroeconomic model for determining yields on municipal bond market for states under u.s. monetary union
Date 2015-12
Description This dissertation develops a macroeconomic model of state borrowing costs for the U.S. monetary union that is founded on the real business cycle theory. The model develops supply and demand side equations for the U.S. monetary union. It shows that the spread between the borrowing cost of a state and the risk free rate is function of default probability (PD) of the state government and loss given default (LGD) for investors. In this macroeconomic model framework, the probability of default is determined simultaneously by the intertemporal utility maximization behaviors of investors (consumers) and the ability of a state government to maintain its budget constraints. This model also empirically identifies exogenous shocks that influence the default probability and the borrowings cost of a state in the U.S. monetary union. After analyzing 17,400 newly issued general obligation bonds and controlling for the variation in bond characteristics, empirical analysis shows that exogenous shocks emerge from state fiscal institutions, political institutions, government budgetary decisions, public debt stock, pension funding, and labor market conditions; all these variables impact the yield spread between a state borrowings cost and the risk free rate.
Type Text
Publisher University of Utah
Subject Macroeconomy; Municipal Bond; Probability of Default; Real Business Cycle; State Finance
Dissertation Institution University of Utah
Dissertation Name Doctor of Philosophy
Language eng
Rights Management Copyright © Mahfuz Raihan 2015
Format Medium application/pdf
Format Extent 27,195 bytes
Identifier etd3/id/3978
ARK ark:/87278/s63r4245
Setname ir_etd
ID 197528
Reference URL https://collections.lib.utah.edu/ark:/87278/s63r4245
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