Impact of Credit Rating Constraints on Spending Volatilities: Evidence from U.S. States
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Even with the practical virtue of fiscal stability, state governments behave with fiscal instability. This is because the budgetary choices of governments are made under constrained conditions. This study examines how credit rating constraints influence spending behaviors. The results indicate that states with high credit ratings are positively related to spending volatility, but states with a high level credit rating during economic downturns have less spending volatility than during economic booms. States with high level credit ratings, combined with a strong governor, have less spending volatility than to those with weak governors. In conclusion, the budgetary choices of governments are made under constrained conditions such as the credit rating and governor power.
Abstract
Even with the practical virtue of fiscal stability, state governments behave with fiscal instability. This is because the budgetary choices of governments are made under constrained conditions. This study examines how credit rating constraints influence spending behaviors. The results indicate that states with high credit ratings are positively related to spending volatility, but states with a high level credit rating during economic downturns have less spending volatility than during economic booms. States with high level credit ratings, combined with a strong governor, have less spending volatility than to those with weak governors. In conclusion, the budgetary choices of governments are made under constrained conditions such as the credit rating and governor power.
참고문헌 (57)
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