The determinants of the municipal debt policy in Spain

Abstract

This paper analyzes the impact of economic, social and political factors on municipal debt behavior. With this aim, we have obtained a stratified random sample of 130 cities during a five-year period. These data have been used to configure a micro panel to obtain accurate estimates and to control for problems such as unobserved heterogeneity. The main conclusion obtained from this process is that non-financial surplus/deficit, financial independence, capital expenditures, and capital revenues are the variables that best explain the indebtedness of this type of entities.