Jha, Akshaya. <br/><br/>
Polluting Public Funds:  The Effect of Environmental Regulation on Municipal Bonds. / 
Akshaya Jha, Stephen A. Karolyi, Nicholas Z. Muller. 
 - Cambridge, Mass.  National Bureau of Economic Research  2020. 
 - 1 online resource:  illustrations (black and white); 
 - NBER working paper series  no. w28210 .
 - Working Paper Series (National Bureau of Economic Research)  no. w28210. .
<br/><br/> December 2020. 
<br/><br/> We present three findings on the effects of environmental regulation on the municipal bond market. First, yields increase (decrease) after a new standard is proposed (finalized), consistent with the resolution of regulatory uncertainty. Second, around annual compliance announcements, yields fall for counties that remain in compliance but increase for newly noncompliant counties. Third, yields are substantially higher for bonds from counties just above the pollution threshold relative to counties just below the threshold. Our findings suggest that increases in regulatory stringency or uncertainty over future environmental policy increase the cost of municipal debt raised to fund critical infrastructure. 
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