The municipal puzzle : a review of the literature

Numerous papers have explored the pricing of municipal bonds relative to taxable instruments. An emerging theme of this literature is the persistently steep municipal term structure, and its incompatibility with prevailing notions of capital market equilibrium. This contradiction is known as the Municipal Puzzle. In this thesis, we critically assess the various theories advanced so far to explain the municipal puzzle. After considering the evidence, we identify the tax avoidance theory as being on balance the most likely candidate. The thesis then develops a helpful variation on the original tax avoidance view developed by Green. In addition, we propose a theoretical framework to overcome the apparent incompatibilities between the opportunity for tax avoidance and overall asset market equilibrium.

Department dc:contributor.department

Sloan School of Management.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2002

Author dc:creator

• Dwek, Julian, 1974-

Advisor dc:contributor.advisor

• John C. Cox.

• Sloan School of Management.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

en_US

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/28245

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/28245