Investigators at Federal Reserve Bank of Chicago Report Findings in Investment (The “privatization”of Municipal Debt): Investment

2024 OCT 08 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Fresh data on Investment are presented in a new report. According to news reporting out of Chicago, Illinois, by NewsRx editors, research stated, “We study the determinants of local governments’ reliance on bank loans using granular data from the Federal Reserve. Governments that are larger, riskier, rely on historically stable revenue sources, or have higher spending relative to revenues are more likely to borrow from banks.”

Our news journalists obtained a quote from the research from the Federal Reserve Bank of Chicago, “Declines in revenues, reductions in bond market access, and relationships with financial advisers and underwriters all strongly predict higher bank loan reliance. While resemblance between bank loans and bonds is limited, loans afford governments significant financial flexibility not otherwise available in the municipal bond market. The frequent loan renegotiation and credit line use are both highly responsive to changes in credit quality, thereby tailoring debt contracts to changes in government fundamentals.”

According to the news editors, the research concluded: “The largest entities find this flexibility most useful with nearly 45% of entities in the top revenue quintile obtaining a bank loan by 2017.”

This research has been peer-reviewed.

For more information on this research see: The “privatization”of Municipal Debt. Journal of Public Economics, 2024;237. Journal of Public Economics can be contacted at: Elsevier Science Sa, PO Box 564, 1001 Lausanne, Switzerland. (Elsevier - www.elsevier.com; Journal of Public Economics - http://www.journals.elsevier.com/journal-of-public-economics/)

Our news journalists report that additional information may be obtained by contacting Ivan T. Ivanov, Federal Reserve Bank of Chicago, 230 S LaSalle St, Chicago, IL 60604, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.jpubeco.2024.105156. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.

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