The Long-Run Linkage Between Yields on Treasury and Municipal Bonds and the 1986 Tax Act

William J. Crowder and Mark Wohar ()
Additional contact information
William J. Crowder: University of Texas at Arlington

Finance from EconWPA

Abstract: The Tax Act of 1986 changed the tax treatment of tax-exempt municipal bonds for banks. Since banks were the dominant participant in the municipal bond market until 1986, some believe that this resulted in the breakdown of the long-run equilibrium relationship between municipal and U.S. treasury securities of equal maturity. We present evidence that there was a significant break in the relationship around the time of the Tax Act and that once this break is accounted for, the relationship between municipal and treasury yields remains intact.

Keywords: municipal bonds; tax-exempt; 1986 Tax Act (search for similar items in EconPapers)
JEL-codes: G (search for similar items in EconPapers)
Date: 1997-02-25
Note: Type of Document - Postscript; prepared on IBM PC ; to print on PostScript; pages: 26; figures: included

Downloads: (external link)
http://129.3.20.41/eps/fin/papers/9702/9702005.pdf (application/pdf)
http://129.3.20.41/eps/fin/papers/9702/9702005.ps.gz (application/postscript)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:9702005

Access Statistics for this paper

More papers in Finance from EconWPA
Series data maintained by EconWPA ().