Year: 2015
Type: article
Abstract: Previous studies have highlighted the question of government loan interest as one of great current importance. Government borrowing levels are high, and reducing interest payments would generate savings to meet other spending needs and/or to lower taxation, thus supporting the sustainability of public finances. However, no previous study has presented a method for a local government to calculate its own credit risk and thus be in a position to negotiate lower interest rates on its borrowing. This article defines a financial model that enables local governments to estimate the interest rate payable on a bank loan, based on their credit risk premium, in accordance with the Basel II rules and the findings of our empirical study of large local governments.
Source: Applied Economics
Institution: Universidad de Granada
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
Awards: G4359859856, G5505043949, G8534323742
OpenAlex ID: W2205834278