U.S. municipal yields and unfunded state pension liabilities

Roel Beetsma, Zina Lekniute and Eduard Ponds

No 11998, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We present empirical evidence that municipal bond yields are increasing in the pension debt towards U.S. state civil servants. However, positive yield effects of both pension and explicit debt are found only for the period since the start of the crisis, suggesting that the crisis triggered awareness of budgetary sustainability. The marginal yield effect of higher pension debt is smaller than that of higher explicit debt, but still economically meaningful. The effect of higher pension debt seems stronger when using market values of pension assets than actuarial values, suggesting that investors pay more attention to market values.

Keywords: Civil servants pension funds; Underfunding; Explicit debt; Implicit debt; Municipal yields; Unfunded pension liabilities; Market values; Actuarial values (search for similar items in EconPapers)
JEL-codes: G12 H55 H74 H75 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-age and nep-fmk
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Citations: View citations in EconPapers (1)

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Journal Article: U.S. municipal yields and unfunded state pension liabilities (2019)
Working Paper: U.S. Municipal Yields and Unfunded State Pension Liabilities (2017)
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