Loan price modelling for local governments using risk premium analysis

Andr鳠 Navarro-Galera, Salvador Rayo-Cant, Juan Lara and Dionisio Buend𫑃arrillo
Authors registered in the RePEc Author Service: Dionisio Buendía-Carrillo ()

Applied Economics, 2015, vol. 47, issue 58, 6257-6276

Abstract: Previous studies have highlighted the question of government loan interest as one of great current importance. Government borrowing levels are high, and reducing interest payments would generate savings to meet other spending needs and/or to lower taxation, thus supporting the sustainability of public finances. However, no previous study has presented a method for a local government to calculate its own credit risk and thus be in a position to negotiate lower interest rates on its borrowing. This article defines a financial model that enables local governments to estimate the interest rate payable on a bank loan, based on their credit risk premium, in accordance with the Basel II rules and the findings of our empirical study of large local governments.

Date: 2015
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2015.1068924 (text/html)
Access to full text is restricted to subscribers.

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: https://EconPapers.repec.org/RePEc:taf:applec:v:47:y:2015:i:58:p:6257-6276

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2015.1068924

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().