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Intertemporal diversification of sub-sovereign debt
Örebro universitet, Handelshögskolan vid Örebro Universitet. Kommuninvest of Sweden, Örebro, Sweden. (Nationalekonomi/Finans)ORCID-id: 0000-0002-9723-8386
2020 (engelsk)Inngår i: Empirical Economics, ISSN 0377-7332, E-ISSN 1435-8921, Vol. 58, nr 2, s. 453-487Artikkel i tidsskrift (Fagfellevurdert) Published
Abstract [en]

This paper presents a comprehensive empirical analysis of the debt maturity structure of the Swedish municipal sector. The Swedish municipal debt portfolio is characterized by a short maturity structure and an asset-liability mismatch that poses potentially severe roll-over risk. The 2008–2009 financial crisis manifested as a liquidity shock to the sector that highlighted the dangers of short-term funding strategies in conjunction with low levels of intertemporal diversification. In this study we analyze to what extent this led to a change of intertemporal diversification. Based on a unique contract-level monthly data set of municipal loans issued by Kommuninvest of Sweden from January 1997 to June 2016, we construct and estimate a range of dispersion and moment measures to capture the change of various distributional characteristics of the maturity structure. These measures are used as dependent variables in fixed-effects models together with a number of control variables to estimate the effect of the debt-crisis liquidity shock. The main finding is that the crisis did affect the diversification, but not in a persistent way. A possible explanation is that the municipalities found that Kommuninvest through jointly guaranteed lending was able to function as a lender of last resort and thereby mitigates the roll-over risk. It is also found that fiscal and financial properties such as debt-to-tax base ratio, tax base volatility and per capita income are associated with the characteristics of the debt maturity structure of Swedish municipalities, as well as macroeconomic factors such as the term structure of interest rates.

sted, utgiver, år, opplag, sider
Berlin: Springer, 2020. Vol. 58, nr 2, s. 453-487
Emneord [en]
Short-term debt, Term structure, Liquidity risk, Roll-over risk, Asset-liability management, Debt maturity, Financial crisis
HSV kategori
Forskningsprogram
Nationalekonomi
Identifikatorer
URN: urn:nbn:se:oru:diva-69046DOI: 10.1007/s00181-018-1525-5ISI: 000520005500003Scopus ID: 2-s2.0-85051671445OAI: oai:DiVA.org:oru-69046DiVA, id: diva2:1250791
Konferanse
The 3rd International Conference in Applied Macro and Empirical Finance (AMEF 2017), Thessaloniki, Greece, April 21-22, 2017; The 2017 Swedish Graduate Program in Economics (SWEGPEC) annual workshop in Stockholm, Stockholm, Sweden, November 29-30, 2017
Prosjekter
Local Government Finance Data Analysis - LOGFIN
Forskningsfinansiär
Vinnova
Merknad

Funding Agency:

Kommuninvest of Sweden AB 

This paper has benefited from comments by two anonymous referees, Martin Andersson, Pär Österholm, Lars Hultkrantz, Martin Nordström, Niclas Krüger, Mattias Bokenblom, Erik Törnblom and seminar participants at Örebro University, the 3rd International Conference in Applied Macro and Empirical Finance in Thessaloniki and the 2017 Swedish Graduate Program in Economics (SWEGPEC) annual workshop in Stockholm.

Tilgjengelig fra: 2018-09-25 Laget: 2018-09-25 Sist oppdatert: 2020-04-07bibliografisk kontrollert
Inngår i avhandling
1. The Treasurer's Guide to the Municipality: Essays on Sub-Sovereign Finance
Åpne denne publikasjonen i ny fane eller vindu >>The Treasurer's Guide to the Municipality: Essays on Sub-Sovereign Finance
2019 (engelsk)Doktoravhandling, med artikler (Annet vitenskapelig)
Abstract [en]

This thesis presents a comprehensive empirical analysis of the current state of Swedish sub-sovereign finance from multiple perspectives, starting from the local and moving to the national. Financial risks may occur in a long line of financial obligations and transactions. Thus, for understanding the full scope of financial risks one perspective is not sufficient. From a societal perspective the question of sub-sovereign debt management is important since mismanagement may lead to substantial risks which may impact the lives of citizens by a weakening of the Swedish public programs. Sub-sovereign debt is mainly funded by issuing financial securities in both national and foreign capital markets. Understanding the market perception regarding the risk profile of Swedish sub-sovereigns may be beneficial in improving the funding conditions of the sector and in turn reduce the cost of public investments. Financial markets are however not stand-alone entities and are heavily impacted by the policy decisions of public institutions. Thus, monetary policy plays an important role in affecting financial markets and consequently the funding conditions of Swedish sub-sovereigns. Given the contemporary approach to monetary policy this effect may be somewhat different compared to what it has been historically. There are however reasons to suspect that the national policy decisions are in large part driven by international occurrences and by foreign governments through international spillovers. Thus, for understanding the interlinked nature of financial markets a wider perspective is needed. These are some of the areas which are investigated in this thesis.

sted, utgiver, år, opplag, sider
Örebro: Örebro University, 2019. s. 26
Serie
Örebro Studies in Economics, ISSN 1651-8896 ; 41
Emneord
Bayesian VAR, Cointegration, Financial crisis, Intertemporal diversification, Risk premium decomposition, Roll-over risk, Small open economy, Spillovers, Spread, Unconventional monetary policy
HSV kategori
Identifikatorer
urn:nbn:se:oru:diva-71512 (URN)978-91-7529-272-4 (ISBN)
Disputas
2019-03-08, Örebro universitet, Hörsalen, Musikhögskolan, Fakultetsgatan 1, Örebro, 13:15 (engelsk)
Opponent
Veileder
Tilgjengelig fra: 2019-01-16 Laget: 2019-01-16 Sist oppdatert: 2019-02-13bibliografisk kontrollert

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