New Empirical Evidence on Factors Influencing the Yield on High-Grade Municipal Bonds

Authors

James R. Barth, Auburn University, Alabama, U.S.A.
Richard J. Cebula, University of Tennessee Knoxville, Tennessee, U.S.A.
Nguyen T.H. Nguyen, Minnesota State University Mankato, Minnesota, U.S.A.

Abstract

We investigate the impact of federal budget deficits and other factors on the ex-post and ex-ante real yields on high-grade municipal bonds. The estimation results reveal that both yields increase with the real yield on 30-year Moody’s Aaa-rated bonds and provisions in the Community Reinvestment Act but decrease with net capital inflows, the real GDP growth rate, and the average effective federal income tax rate. Most importantly, both yields are increasing functions of the federal budget deficit. These results support limiting the size of federal budget deficits to avoid the excessive crowding out of private investment spending.

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License

Recommended Citation

Barth, James R.; Cebula, Richard J.; and Nguyen, Nguyen T.H. (2023) "New Empirical Evidence on Factors Influencing the Yield on High-Grade Municipal Bonds," American Business Review: Vol. 26: No. 2, Article 11.
DOI: 10.37625/abr.26.2.503-518
Available at: https://digitalcommons.newhaven.edu/americanbusinessreview/vol26/iss2/11

DOI

10.37625/abr.26.2.503-518