A Century of Municipal Bond Financing

Abstract

This paper presents a comprehensive analysis of municipal bond markets over the last 110 years using novel hand-collected data. We document a sizable reduction in average maturities from 30 to 10 years. Two key factors shaped these changes: macroeconomic shifts following the Great Depression and changes in the investor base due to tax reforms in the 1980s. Our findings reveal the vulnerability of short-term municipal debt during natural disasters, emphasizing the need for debt management strategies. Our results highlight how tax policies and evolving investor dynamics critically influence the resilience of municipal financing.

Keywords: Debt maturity, financial constraints, government debt, municipal bonds

JEL Classification: G12, G18, G32, H74, N22