TY - JOUR
T1 - The impact of late budgets on state government borrowing costs
AU - Andersen, Asger Lau
AU - Lassen, David Dreyer
AU - Nielsen, Lasse Holbøll Westh
N1 - JEL classification: H72; H61; H63
PY - 2014/1/1
Y1 - 2014/1/1
N2 - We analyze how a key component of fiscal governance, the ability of governments to pass a budget on time, affects government bond yield spreads. Based on a sample of 36 US states from 1988 to 1997, and using an original data set on budget enactment dates, we estimate that a 30. day budget delay has a cumulative impact that is equivalent to a one-time increase in the yield spread of around 10 basis points. States with sufficient liquidity incur no costs from late budgets, while unified governments face large penalties from not finishing a budget on time.
AB - We analyze how a key component of fiscal governance, the ability of governments to pass a budget on time, affects government bond yield spreads. Based on a sample of 36 US states from 1988 to 1997, and using an original data set on budget enactment dates, we estimate that a 30. day budget delay has a cumulative impact that is equivalent to a one-time increase in the yield spread of around 10 basis points. States with sufficient liquidity incur no costs from late budgets, while unified governments face large penalties from not finishing a budget on time.
KW - Faculty of Social Sciences
KW - Fiscal governance
KW - Late budgets
KW - US States
KW - Government borrowing cost
KW - Sovereign bond spreads
KW - Divided government
KW - End-of-year balances
UR - http://www.scopus.com/inward/record.url?scp=84888259166&partnerID=8YFLogxK
U2 - 10.1016/j.jpubeco.2013.10.004
DO - 10.1016/j.jpubeco.2013.10.004
M3 - Journal article
AN - SCOPUS:84888259166
SN - 0047-2727
VL - 109
SP - 27
EP - 35
JO - Journal of Public Economics
JF - Journal of Public Economics
ER -