Structural Deficits and State Borrowing Costs

18 Pages Posted: 31 Aug 2007

See all articles by Earl D. Benson

Earl D. Benson

Western Washington University - Finance and Marketing Department

Barry R. Marks

University of Houston, Clear Lake - School of Business and Public Administration

Abstract

This study examines the factors that affect the borrowing costs of state governments with specific attention being paid to the impact of state structural deficits (or fiscal imbalances) on borrowing costs. The findings for 1999-2000 suggest that interest costs for state competitively sold municipal securities reflect estimates of state structural deficits. States with a higher structural deficit were found to pay significantly higher interest costs. The evidence implies that bond ratings do not fully reflect the fiscal problems faced by state governments.

Suggested Citation

Benson, Earl D. and Marks, Barry R., Structural Deficits and State Borrowing Costs. Public Budgeting & Finance, Vol. 27, No. 3, pp. 1-18, Fall 2007. Available at SSRN: https://ssrn.com/abstract=1011291 or http://dx.doi.org/10.1111/j.1540-5850.2007.00880.x

Earl D. Benson (Contact Author)

Western Washington University - Finance and Marketing Department ( email )

FMDS Department MS 9077
Bellingham, WA 98225-9077
United States
360-650-3375 (Phone)
360-650-4844 (Fax)

Barry R. Marks

University of Houston, Clear Lake - School of Business and Public Administration ( email )

Houston, TX 77058
United States

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