Date of Award

Spring 3-6-2018

Degree Type


Degree Name

Doctor of Philosophy (PhD)


Public Management and Policy


The majority of state and local governments in the U.S. have debt-issuing capacity. There is quite a bit of heterogeneity in the types of issuers and financial products that are issued in the municipal bond market. The variety of market participants (underwriters, dealer-brokers, etc.) add further complexity to the debt performance outcomes of issuers. The main feature that sets the muni market apart from other capital markets is the tax exemption of interest income - most municipal bonds are exempt from federal, state, and certain local income taxes. The first set of findings show that the effect of the municipal bond tax exemption policy are substantial. Smaller municipalities benefit the most from the ability to issue tax-exempt munis. Second, results show that the secondary market contains an additional layer of real-time quality information not captured by other lagged metrics such as credit ratings. This information contained in the secondary market performance of the issuer’s existing debt has a direct impact on future borrowing costs for state and local governments. Finally, hyper-trading in secondary market for municipal bonds is explained using several conceptual frameworks, such as portfolio absorption, speculative trading, and call complexity.