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Yes / We develop an intensity-based model of municipal yields, making simultaneous use of the CDS premiums of the insurers and both insured and uninsured municipal bond transactions. We estimate the model individually for 61 municipal issuers by exploiting the dramatic decline in credit quality of the bond insurers from July 2007 to June 2008, and decompose the municipal yield spread based on the estimated parameters. The decomposition reveals a dominant role of the liquidity component as well as interactions between liquidity and default similar to those modeled by Chen et al. (2016) for corporate bonds. Towards the end of the sample period, our model also reproduces the "yield inversion" phenomenon documented by Bergstresser et al. (2010).

This dissertation consists of three essays in the field of environmental economics and sustainable finance. The first chapter investigates the impact of localized exposure to heat waves and floods on the pricing of U.S. municipal bonds. I identify a significant relationship between the vulnerability of cities to heat waves and flood-related damages and municipal bond yield spreads. In particular, the effects are more pronounced in the case of municipal bonds with extended maturity periods. Cities demonstrating heightened capacities for adaptation exhibit a discernible mitigating impact on the yield spreads of these bonds. Moreover, my paper underscores the variations in political affiliations, climate attitudes, and risk perceptions across different cities, shaping this dynamic relationship. The second chapter presents empirical insights into the economic and financial effects of natural disasters, focusing on wildfires in California. Integrating financial data with historical wildfire records from 2016 to 2020, the study quantifies how wildfire risks influence municipal tax policies, revealing that local governments adjust tax rates in response to these risks. Furthermore, the study examines how municipalities enhance expenditures on public safety, particularly in fire and disaster preparedness, reflecting proactive measures to mitigate wildfire impacts and ensure community resilience. The third chapter, co-authored with Christina Laskaridis, analyzes sovereign green, social, sustainability, and sustainability-linked (GSS+) bonds in emerging and developing countries. This study maps out trends and characteristics of sovereign GSS+ bond issuances, assessing their potential to finance the energy transition and achieve Sustainable Development Goals (SDGs). The research evaluates the risks and limitations of GSS+ bonds, emphasizing the need for longer maturities, longer costs of capital, and increased funding scales to effectively contribute to sustainable development financing. Overall, these essays contribute multifaceted perspectives on the intersection of climate risks, fiscal policies, and sustainable finance, offering valuable implications for policymakers, investors, and stakeholders aiming to navigate the complexities of climate economics.