The Option Value of Municipal Liquidity

• 成果类型: Article
• 署名作者: Haughwout, Andrew; Hyman, Benjamin; Shachar, Or
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - New York
• 刊物名称: AMERICAN ECONOMIC JOURNAL-ECONOMIC POLICY
• ISSN/ISSBN: 1945-7731
• DOI: 10.1257/pol.20240197
• 发表日期: 2026
• 关键词: regression discontinuity design; bond; manipulation; Covid-19; MARKETS; default; ratings

摘要

States and localities are relied upon to implement macroeconomic stabilization policies and ensure service delivery in times of crisis. In April 2020, the introduction of the Municipal Liquidity Facility (MLF) added an emergency lending instrument to the policy arsenal, guaranteeing liquidity, but at a price. Using a regression discontinuity design that exploits MLF-lending-eligibility population cutoffs, we find that the MLF contributed to the easing of liquidity pressures and reduced perceived credit risk for municipal borrowers. Low-rated issuers experienced yield reductions of at least 26 bps. We also provide suggestive evidence that these liquidity effects translated into employment gains. (JEL E58, H71, H72, H75, H77)