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Municipal Bond Pricing and the New York City Fiscal Crisis

1982; Wiley; Volume: 37; Issue: 5 Linguagem: Inglês

10.2307/2327847

1540-6261

David S. Kidwell, Charles Trzcinka,

Local Government Finance and Decentralization

The Journal of FinanceVolume 37, Issue 5 p. 1239-1246 Article Municipal Bond Pricing and the New York City Fiscal Crisis DAVID S. KIDWELL, DAVID S. KIDWELLSearch for more papers by this authorCHARLES A. TRZCINKA, CHARLES A. TRZCINKASearch for more papers by this author DAVID S. KIDWELL, DAVID S. KIDWELLSearch for more papers by this authorCHARLES A. TRZCINKA, CHARLES A. TRZCINKASearch for more papers by this author First published: December 1982 https://doi.org/10.1111/j.1540-6261.1982.tb03615.xCitations: 23 Blount National Bank Professor of Finance, The University of Tennessee; and Assistant Professor of Finance, State University of New York at Buffalo, respectively. The authors would like to thank Michael J. Brennan and Michael H. Hopewell for their help in revising this manuscript. Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinkedInRedditWechat ABSTRACT This paper's findings suggests that the New York City fiscal crisis by itself did not lead to a fundamental change in risk perceptions of investors, resulting in higher interest rates in the municipal bond market. The monthly prediction errors generated by time series tests were relatively small and none were statistically significant. Only the signs on the prediction errors for June, July, and August were consistent with a New York City effect. Thus, if the New York City default had an impact on aggregate interest rates, it was at most small and of short duration. REFERENCES 1 K.Auletta. The Streets Were Paved with Gold. New York: Random House, 1979. Google Scholar 2 T.Cooley and E.Prescott. "Estimation in the Presence of Stochastic Parameter Variation." Econometrica (January 1976), 167–84. 10.2307/1911389 Web of Science®Google Scholar 3 J. R.Forbes and J. E.Peterson. Costs of Credit Erosion in the Municipal Bond Market. Chicago: Municipal Finance Officers Association, 1975. Google Scholar 4 W. E. Gibson. "Interest Rates and Inflationary Expectations: New Evidence." American Economic Review 64 (December 1972), 854–965. Google Scholar 5 E. M. Gramlich. "New York: Ripple or Tidal Wave." American Economic Review 66 (May 1976), 415–29. Web of Science®Google Scholar 6 G. H. Hempel. "An Evaluation of Municipal Bankruptcy Laws and Proceedings." Journal of Finance 27 (December 1972), 1339–51. Google Scholar 7 D. S. Kidwell and C. A. Trzcinka. "The Risk Structure of Interest Rates and the Penn-Central Crisis." Journal of Finance 34 (June 1979), 751–60. 10.1111/j.1540-6261.1979.tb02140.x Web of Science®Google Scholar 8 D. L. Hoffland. "The New York City Effect in the Municipal Bond Market." Financial Analysts Journal (MarchApril 1977), pp. 36–9. Google Scholar 9 M. H. Miller. "Debt and Taxes." Journal of Finance 32 (May 1977), 261–75. 10.1111/j.1540-6261.1977.tb03267.x Web of Science®Google Scholar 10 G. E. Peterson and H. Galpher. "Tax Exempt Financing of Private Industrial Pollution Control Investment." Public Policy (Winter 1975), pp. 81‒103. Web of Science®Google Scholar 11 C. A.Trzcinka. "The Pricing of Tax-Exempt Bonds and the Miller Hypothesis." Forthcoming: Journal of Finance. Google Scholar 12 VanHorne. "Financial Markets Rates and Flows." Englewood Cliffs, New Jersey: Prentice-Hall, 1978. Google Scholar Citing Literature Volume37, Issue5December 1982Pages 1239-1246 ReferencesRelatedInformation