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The "Privatization" of Municipal Debt

Ivan T. Ivanov () and Tom Zimmermann
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Ivan T. Ivanov: Federal Reserve Board, 20th Street and Constitution Avenue NW, Washington, DC 20551

No 62, ECONtribute Discussion Papers Series from University of Bonn and University of Cologne, Germany

Abstract: This paper analyzes a continuous-time Coase setting with finite horizon, interdependent values, and different discount rates. Our full characterization of equilibrium behavior permits studying how patience shapes the bargaining outcome. We obtain that (i) the seller’s commitment problem persists even when she is fully patient, (ii) making the seller more impatient may increase equilibrium prices, (iii) when adverse selection is not strong, the buyer is ex-post better off when he is more impatient, and (iv) when discounting is time-dependent, episodes where the seller or the buyer have a high discount rate feature a large probability of trade, but only periods with high buyer discounting lead to a fast price decline.

Keywords: state and local government debt; debt heterogeneity; fiscal shocks (search for similar items in EconPapers)
JEL-codes: F18 H6 M41 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2021-02
New Economics Papers: this item is included in nep-mic
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Downloads: (external link) First version, 2021 (application/pdf)

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