Using fuzzy rule–based systems to evaluate overall financial performance of governments: An enhancement to the bond rating process

Salwa Ammar, William Duncombe, Yilin Hou, Bernard Jump, Ronald Wright

Research output: Contribution to journalArticle

23 Scopus citations

Abstract

Credit ratings remain a key feature of municipal debt management. The primary objective of this article is to develop a new methodology for evaluating the financial performance and creditworthiness of governments and to illustrate this approach for a sample of large American cities. Specifically, we develop a fuzzy rule–based system (FRBS) that uses economic, debt, and other financial information as well as a measure of financial management to produce rankings of city financial performance. The FRBS credit ratings are highly correlated with actual Moody’s ratings for these cities. FRBS have the potential of enhancing the rating process by standardizing the information used and encouraging consistent rules about what combinations of inputs result in good, fair, or poor performance.

Original languageEnglish (US)
Pages (from-to)91-110
Number of pages20
JournalPublic Budgeting and Finance
Volume21
Issue number4
DOIs
StatePublished - Jan 1 2001

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Public Administration

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