The impact of late budgets on state government borrowing costs

Asger Lau Andersen, David Lassen and Lasse Holbøll Westh Nielsen

Journal of Public Economics, 2014, vol. 109, issue C, 27-35

Abstract: We analyze how a key component of fiscal governance, the ability of governments to pass a budget on time, affects government bond yield spreads. Based on a sample of 36 US states from 1988 to 1997, and using an original data set on budget enactment dates, we estimate that a 30day budget delay has a cumulative impact that is equivalent to a one-time increase in the yield spread of around 10 basis points. States with sufficient liquidity incur no costs from late budgets, while unified governments face large penalties from not finishing a budget on time.

Keywords: Fiscal governance; Late budgets; US States; Government borrowing cost; Sovereign bond spreads; Divided government; End-of-year balances (search for similar items in EconPapers)
JEL-codes: H61 H63 H72 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:109:y:2014:i:c:p:27-35

DOI: 10.1016/j.jpubeco.2013.10.004

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