JEL classification: G23, G32, H74
Keywords: Municipal bonds, Capital Supply, Bond Funds, Fund flows
학회소식
[2022년 5차 CAFM2022]Mutual Fund Flows and Capital Supply in Municipal Financing
작성자 : 관리자
조회수 : 302
게시일 :
2022-12-20
We show causal effects of capital supply from mutual funds on municipal financing. We employ a novel identification strategy based on Morningstar star rating introductions to isolate the supply-side effects that are orthogonal to both fund and bond issuer fundamentals. The results using both this instrument and existing approaches in the literature show that higher flows into municipal bond funds lead to more municipal bond issuance and larger issues. Relationships among funds, issuers, and underwriters matter for how capital is allocated, as capital follows previous primary market interactions. Municipal issuers take advantage of favorable shocks to capital supply by opting for issues with less potential for delay and with lower transaction costs, such as non-general-obligation and refinancing issues as well as non-green bonds.
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