The impact of late budgets on state government borrowing costs

Research output: Contribution to journalJournal articleResearchpeer-review

Asger Lau Andersen, David Dreyer Lassen, Lasse Holbøll Westh Nielsen

We analyze how a key component of fiscal governance, the ability of governments to pass a budget on time, affects government bond yield spreads. Based on a sample of 36 US states from 1988 to 1997, and using an original data set on budget enactment dates, we estimate that a 30. day budget delay has a cumulative impact that is equivalent to a one-time increase in the yield spread of around 10 basis points. States with sufficient liquidity incur no costs from late budgets, while unified governments face large penalties from not finishing a budget on time.
Original languageEnglish
JournalJournal of Public Economics
Volume109
Pages (from-to)27-35
Number of pages9
ISSN0047-2727
DOIs
Publication statusPublished - 1 Jan 2014

Bibliographical note

JEL classification: H72; H61; H63

    Research areas

  • Faculty of Social Sciences - Fiscal governance, Late budgets, US States, Government borrowing cost, Sovereign bond spreads, Divided government, End-of-year balances

ID: 94378154