Grant Levels and Debt Issuance: Is There a Relationship? Is There Symmetry?
In: Public budgeting & finance, Band 24, Heft 3, S. 65-81
ISSN: 1540-5850
Although previous work on fiscal federalism and grants has focused on the effects of grants on expenditures, no published research examines the impact of decreasing grants on state financing. This research addresses how decreasing levels of federal grant money to states affect states' long‐term debt issuance, and whether the relationship is symmetric for increasing and decreasing grants. The model is tested with time series, cross‐sectional data from 1984 to 1999. The results show that grants affect debt issuance, the effect is asymmetric, and direction of the effect differs for different types of debt issuance.