Abstract Debt monitoring rules are a type of fiscal rule that allows states to proactively oversee their local government borrowing. This study examines how these rules impact local borrowing costs using a mixed‐methods approach. It reviews state codes to classify debt monitoring features and creates a rigor index to measure state involvement. The study then assesses how variation in state involvement influences borrowing costs. The results indicate that debt monitoring rules involving early and substantive state involvement, particularly those that facilitate timely information exchange and state engagement, are associated with lower borrowing costs, while passive monitoring has little effect.
Justina Jose (Wed,) studied this question.