Abstract
The objective of this study was to test the association between the surplus/deficit of selected Minnesota municipalities and the net interest cost of the general obligation bonds issued by these municipalities. This objective was accomplished by employing a pooled time-series design. A two-way analysis of variance was used to determine if there was a significant difference in the effect of net interest cost between positive and negative forecast errors. The ANOVA results of both tests indicate that the surplus/deficit is not correlated with increases/ decreases in the net interest cost of the bonds issued by a municipality. The results were unaffected by the exclusion of bond ratings as an independent variable.
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