NDLI: Inter-county Economic Growth and Municipal Access to Finance: Does Your Neighbor’s Credit Rating Matter?

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Inter-county Economic Growth and Municipal Access to Finance: Does Your Neighbor’s Credit Rating Matter?

Content Provider	Semantic Scholar
Author	Ye, Zihan
Copyright Year	2019
Abstract	Exploiting the exogenous rating changes of U.S. municipal bonds caused by Moody’s scale recalibration in 2010, this paper adopts a difference-in-differences approach to identify the inter-county economic effect of municipal credit ratings. I find a positive differential effect on county-level employment and wage income of 3%, following a rating upgrade in the neighboring county. This indirect inter-county effect of neighbor’s upgrade is independent, consistent, and comparable in economic magnitude with the direct effect of an upgrade on same-county outcomes. Four channels, working in parallel, explain the positive effect: government expenditure, commuting flow, economic spillover, and migration. Findings in this paper identify a new economic effect of municipal credit ratings that extends beyond the issuers’ geographic boundaries and into the neighboring counties. * I am grateful to Ryan Israelsen for sharing data on Moody’s recalibration and to Igor Cunha for sharing recalibration variable used in Adelino et al. (2017). I benefit greatly from the thoughtful guidance of the members of my committee: Sam Bonsall, Kimberly Cornaggia, Matthew Gustafson, David Haushalter, and Tim Simin. All errors are mine own. † Smeal College of Business, Pennsylvania State University. Email: zfy5027@psu.edu
File Format	PDF HTM / HTML
Alternate Webpage(s)	https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=AFAPS2020&paper_id=170
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article

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