The relationship between local government economic freedom and bond ratings

John Dove

Journal of Financial Economic Policy, 2017, vol. 9, issue 4, 435-449

Abstract: Purpose - With a newly developed measure of economic freedom across US local government jurisdictions, this paper aims to estimate the relationship between economic freedom and bond ratings. Design/methodology/approach - The author uses a battery of cross-sectional econometric models to identify the impact that economic freedom might have on bond ratings using a sample of US municipal governments. Findings - Overall, the results indicate that relatively more economic freedom within a local jurisdiction is associated with higher bond ratings and thus lower borrowing costs. However, similar to Roychoundhury andLawson (2010), no specific subcomponent seems to affect bond ratings. Originality/value - To the author’s knowledge this is the first scholarly work to address this topic at the local level.

Keywords: Debt; Debt management; Cross-sectional models; Structure and scope of government; H73; H74; R51 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfeppp:jfep-12-2016-0103

DOI: 10.1108/JFEP-12-2016-0103

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