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The State Line on Debt

Murphy headshot
Thursday, August 4, 2016

Risk-sharing between governments has become increasingly common since the 2008 crisis, with the European Central Bank managing cross-country risk-sharing packages in Greece, Ireland, and Portugal, as well as taking on risk through quantitative easing in distressed Eurozone states.

To gain insight into intergovernmental risk-sharing, Professors Dermot Murphy and Chang Lee, along with co-author Pengjie Gao of Notre Dame, researched the effects of risk-sharing among different governments in the U.S. municipal bond market. Their results, published in the recent paper, “Municipal Borrowing Costs and State Policies for Distressed Municipalities,” formed the basis for Professor Murphy's recent talk at the Brookings Insitution’s Municipal Finance Conference. Full video of Professor Murphy's lecture can be viewed here.