ABSTRACT
The previous chapters in Part VI showed that debt has been used as a tool of fiscal and monetary policies by the federal government. According to Keynesian macroeconomic theories, debt-financed governmental expenditures are supposed to stimulate the national economy. In contrast, state and local governments are more likely to borrow monies by issuing municipal bonds to finance various capital projects when general fund tax revenues are not sufficient for launching projects. This chapter introduces specific mechanics of issuing municipal bonds. Readers can easily apply the mechanics of municipal bonds to Treasury securities issued by the federal government as well. This chapter focuses on the following topics:
What Are Bonds? How Do They Work?
Main Participants in Bond Issuance
Different Bond Structures
Factors Affecting Borrowing Costs: Competitive vs. Negotiated Bond Sales
Other Factors Affecting Borrowing Costs
