Collaborative Research: Intermediaries and Product Selection in the Municipal Bond Market

摘要州和地方政府依靠市政债券为基础设施投资提供资金。它们往往是复杂的金融产品，规定了各种特殊条款，如灵活的到期日和独特的赎回条款。债券中的这类条款可能是根据投资者和发行债券的地方政府的财务需要而制定的，但也可能使评估和比较其他选择变得困难。利用债券交易的详细数据，该项目将量化债券条款对市场流动性、中介竞争和地方政府融资成本的影响。本研究的目的是通过对市政债券市场结构、地方政府融资成本、基础设施投资成本等政策的分析，探讨产品属性对市政债券市场搜索摩擦的影响。该研究将记录金融机构作为承销商和经销商的双重角色如何影响产品设计，转向高度定制和复杂的产品。该项目将利用各州法规的差异来限制政府官员的利益冲突，研究债券中的特殊条款如何增加其流动性和承销商在二级交易中的市场力量。基于这些发现，本研究将构建和估计债券发行和交易的模型，该模型考虑了影响债券设计的因素中的丰富异质性：投资者需求，经销商成本和发行人偏好。该奖项反映了NSF的法定使命，并通过使用基金会的知识价值和更广泛的影响审查标准进行评估，被认为值得支持。

AbstractState and local governments rely on municipal bonds to finance investments in infrastructure. They are often complex financial products, specifying a variety of special provisions, such as flexible maturities and unique redemption clauses. Such provisions in a bond may be tailored to the financial needs of investors and the issuing local government, but they may also make it difficult to evaluate and compare alternatives. Using detailed data on bond transactions, the project will quantify the effects of bond provisions on market liquidity, intermediary competition, and cost of local government funding. The insight from this analysis will have implications for policies on municipal bond market structure, the cost of local government funding, and infrastructure investment costs.The project will highlight the impact of product attributes on search frictions in the municipal bond market. The research will document how financial institutions' dual role as underwriters and dealers may affect product design, steering toward highly customized and complex products. Exploiting variations in state regulations to limit government officials' conflicts of interests, the project will investigate how special provisions in a bond may increase both its illiquidity and its underwriter’s market power in secondary trades. Building on these findings, the research will construct and estimate a model of bond issuance and trades, which accounts for rich heterogeneity in the factors that affect bond design: Investor demand, dealer costs, and issuer preferences. Employing the estimated model, the project will quantify market inefficiency and discuss policy implications.This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.