Indiana University SPEA Edward J. Bloustein School of Planning and Public Policy University of Pennsylvania AIR American University

Panel: Policy Issues in Subnational Government Debt Management
(Public and Non-Profit Management and Finance)

Friday, November 13, 2015: 10:15 AM-11:45 AM
Pearson II (Hyatt Regency Miami)

*Names in bold indicate Presenter

Panel Organizers:  Tima T. Moldogaziev, University of Georgia
Panel Chairs:  Tima T. Moldogaziev, University of Georgia
Discussants:  Christine R. Martell, University of Colorado - Denver and Olu Sonola, U.S. Public Finance/Global Infrastructure Group - Fitch Ratings

The Determinants of Subnational Capital Markets: An International Survey
Tima T. Moldogaziev, University of Georgia, Salvador Espinosa, San Diego State University and Christine Martell, University of Colorado - Denver

The Evolving Fiscal Federalism of State and Local Borrowing
Justin Marlowe, University of Washington

The Economic Value of Rating Outlooks in the Municipal Securitis Market
Sharon N. Kioko, University of Washington and Craig L. Johnson, Indiana University

The Architecture of Regulatory Policy in the US Municipal Bond Market
Robert A. Greer, The University of Georgia and Tima T. Moldogaziev, University of Georgia

The papers in this panel tackle the most pertinent policy and regulatory issues in subnational government capital finance. The first paper synthesizes the core fundamental assumptions for a theory of subnational capital market, develops a set of principal testable hypotheses related to the core assumptions, and assesses these hypotheses using a comprehensive data set from a large number of developed and developing countries around the world. The second paper investigates the intersection between federal and state direct and indirect regulatory policies in the local government debt market in the US. It suggests that the growing role that the federal government is taking in regulating financial intermediaries in the subnational capital market has a direct impact on the cost of capital for local governments. The third paper assesses the dynamic relationship between information disclosure and credit quality assessment of local government debt. It empirically confirms that credit quality signals have a significant impact on debt prices in the US municipal market and that significant market efficiencies would be achieved if these signals were made publicly available to all market participants. It argues that Dodd-Frank did not sufficiently consider the true value of credit rating signals in the US subnational market and that federal regulation under this new law has fallen short of appropriate levels of capital market regulation. The last paper offers a comprehensive discussion of the architecture of subnational debt market regulation in the US. It evaluates the roles that federal, state, and self-governing organizations play in ensuring a proper functioning of the local government debt market. However, as is inherently the case in multi-level and multi-stakeholder markets, such multiplicity of actors results in direct and indirect outcomes (both intended and unintended) that each regulator appears to end up producing.