Cooperative Lending and Municipal Finance in Sweden

42 Pages Posted: 6 Mar 2017 Last revised: 10 Mar 2018

Jan Schnitzler

VU University Amsterdam - Faculty of Economics and Business Administration; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Date Written: March 7, 2017

Abstract

This paper studies a specialized institution in Swedish municipal credit markets, known as a municipal credit agency. It is fully owned by its member municipalities and gives them access to long-term credit by raising funds in international bond markets. I document that gaining access to the agency’s credit facility decreases municipal borrowing costs in comparison to commercial bank loans. Built in the agency’s lending terms, I find support of a coinsurance mechanism across municipalities. Nevertheless, the net gains of improved credit access must dominate since almost all Swedish municipalities voluntarily joined by now. Finally, I could not detect evidence that a municipality’s participation in such a municipal credit agency adversely affects its fiscal discipline.

Keywords: municipal borrowing costs, municipal credit agency, local government funding agency

JEL Classification: H74, G12, G21

Suggested Citation

Schnitzler, Jan, Cooperative Lending and Municipal Finance in Sweden (March 7, 2017). Available at SSRN: https://ssrn.com/abstract=2926880 or http://dx.doi.org/10.2139/ssrn.2926880

Jan Schnitzler (Contact Author)

VU University Amsterdam - Faculty of Economics and Business Administration ( email )

De Boelelaan 1105
Amsterdam, 1081HV
Netherlands

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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