Municipal Bond Markets

42 Pages Posted: 12 Nov 2018

See all articles by Dario Cestau

Dario Cestau

IE Business School, IE University

Burton Hollifield

Carnegie Mellon University - David A. Tepper School of Business

Dan Li

Federal Reserve Board

Norman Schürhoff

University of Lausanne; Swiss Finance Institute; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2018


The effective functioning of the municipal bond market is crucial for the provision of public services, as it is the largest capital market for state and municipal issuers. Prior research has documented tax, credit, liquidity, and segmentation effects in municipal bonds. Recent regulatory initiatives to improve transparency have made granular trade data available to researchers, rendering it a natural laboratory to study financial intermediation, asset pricing in decentralized markets, and local public finance. Trade-by-trade studies have found large trading costs, contemporaneous price dispersion and other deviations from the law-of-one- price. More research is required to understand optimal market design and the impact of post-crisis regulation, sustainability, and financial technology.

Keywords: centrality premium, electronification, green bonds, muni-bond puzzle, Municipal Bonds, Over-the-counter markets, trading cost

JEL Classification: G12, G14, G18, G24, G28, H21, H6, H7

Suggested Citation

Cestau, Dario and Hollifield, Burton and Li, Dan and Schürhoff, Norman, Municipal Bond Markets (November 2018). CEPR Discussion Paper No. DP13301. Available at SSRN:

Dario Cestau (Contact Author)

IE Business School, IE University ( email )

Calle Maria de Molina 12, Bajo
Madrid, Madrid 28006

Burton Hollifield

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
(412) 268-6505 (Phone)
(412) 268-6837 (Fax)

Dan Li

Federal Reserve Board ( email )

20th and C Streets, NW
Mail Stop 89
Washington, DC 20551
United States

Norman Schürhoff

University of Lausanne ( email )

Extranef 228
CH-1015 Lausanne
+41 (0)21 692 3447 (Phone)
+41 (0)21 692 3435 (Fax)

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

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