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A New Rule: The Swiss Debt Brake

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  • Mr. Stephan Danninger

Abstract

The paper provides an international comparison and a comprehensive analysis of a new fiscal expenditure rule for the federal government in Switzerland. The proposed rule has two innovative features: it aims at a structurally balanced budget in the short-run by annually setting a cyclically adjusted expenditure ceiling, and it arrests the accumulation of public debt via corrections of future expenditure targets for past deviations from projected fiscal balances. The paper finds that the new rule is likely to reduce procyclical tendencies in fiscal policy and that its objectives are adequate in meeting long-run fiscal challenges arising from demographic changes.

Suggested Citation

  • Mr. Stephan Danninger, 2002. "A New Rule: The Swiss Debt Brake," IMF Working Papers 2002/018, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/018
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    1. Aiyagari, S. Rao & McGrattan, Ellen R., 1998. "The optimum quantity of debt," Journal of Monetary Economics, Elsevier, vol. 42(3), pages 447-469, October.
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    Cited by:

    1. Lars P. Feld, 2010. "Sinnhaftigkeit und Effektivität der deutschen Schuldenbremse," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(3), pages 226-245, August.
    2. Santiago Lago-Peñas & Jorge Martinez-Vazquez & Agnese Sacchi, 2020. "Fiscal stability during the Great Recession: putting decentralization design to the test," Regional Studies, Taylor & Francis Journals, vol. 54(7), pages 919-930, July.
    3. Christian F. Pfeil & Lars P. Feld, 2024. "Does the Swiss Debt Brake Induce Sound Federal Finances? A Synthetic Control Analysis," Public Finance Review, , vol. 52(1), pages 3-41, January.
    4. David Prušvic, 2010. "Evropská fiskální pravidla a jejich účinnost: prvních 15 let [European Fiscal Policy Rules: First 15 Years]," Politická ekonomie, Prague University of Economics and Business, vol. 2010(1), pages 51-69.
    5. Feld Lars P. & Reuter Wolf Heinrich & Yeter Mustafa, 2019. "Öffentliche Investitionen: Die Schuldenbremse ist nicht das Problem," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 20(4), pages 292-303, December.
    6. Eric M. Leeper, 2016. "Should Central Banks Care About Fiscal Rules?," NBER Working Papers 22800, National Bureau of Economic Research, Inc.
    7. Schaltegger, Christoph A. & Feld, Lars P., 2009. "Do large cabinets favor large governments? Evidence on the fiscal commons problem for Swiss Cantons," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 35-47, February.
    8. Asatryan, Zareh & Castellón, César & Stratmann, Thomas, 2018. "Balanced budget rules and fiscal outcomes: Evidence from historical constitutions," Journal of Public Economics, Elsevier, vol. 167(C), pages 105-119.
    9. Berthold Norbert & Koch Daniel, 2008. "Von der (Un-)Möglichkeit ausgeglichener Haushalte / The Impossibility of balanced budgets," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 59(1), pages 39-62, January.
    10. International Monetary Fund, 2010. "United Kingdom: Selected Issues Paper," IMF Staff Country Reports 2010/337, International Monetary Fund.
    11. Lars P. Feld & Christoph A. Schaltegger, 2004. "Do Large Cabinets Favor Large Governments? Evidence from Swiss Sub-federal Jurisdictions," Marburg Working Papers on Economics 200421, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    12. Mr. Erik J. Lundback, 2008. "Medium-Term Budgetary Frameworks - Lessons for Austria from International Experience," IMF Working Papers 2008/163, International Monetary Fund.
    13. Mr. Steven A. Symansky & Mr. Xavier Debrun & Mr. Natan P. Epstein, 2008. "A New Fiscal Rule: Should Israel “Go Swiss?”," IMF Working Papers 2008/087, International Monetary Fund.
    14. Krisztina Tóth, 2005. "The Impact of Legislature and Citizens on the Budgeting Process in Switzerland: Lessons for Central and Eastern Europe," FSES Working Papers 387, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    15. Simon Luechinger & Christoph Schaltegger, 2013. "Fiscal rules, budget deficits and budget projections," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 20(5), pages 785-807, October.
    16. Tobias Beljean & Alain Geier, 2013. "The Swiss Debt Brake - Has It Been a Success?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 149(II), pages 115-135, June.
    17. Christoph A. Schaltegger & Lars P. Feld, 2008. "Do Large Cabinets Favor Large Governments? Evidence on Institutional Restraints on the Fiscal Commons Problem for Swiss Cantons," CREMA Working Paper Series 2008-10, Center for Research in Economics, Management and the Arts (CREMA).
    18. International Monetary Fund, 2007. "Republic of Slovenia: Selected Issues," IMF Staff Country Reports 2007/182, International Monetary Fund.
    19. Hetschko, Clemens & Quint, Dominic & Thye, Marius, 2012. "Nationale Schuldenbremsen für die Länder der Europäischen Union: Taugt das deutsche Modell als Vorbild?," Discussion Papers 2012/12, Free University Berlin, School of Business & Economics.
    20. International Monetary Fund, 2008. "Israel: Selected Issues," IMF Staff Country Reports 2008/063, International Monetary Fund.
    21. Petia Topalova & Dan Nyberg, 2010. "What Level of Public Debt Could India Target?," IMF Working Papers 2010/007, International Monetary Fund.
    22. Eric Mayer & Nikolai Stähler, 2013. "The debt brake: business cycle and welfare consequences of Germany’s new fiscal policy rule," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(1), pages 39-74, February.
    23. Gebhard Kirchgässner & Silika Prohl, 2008. "Sustainability of Swiss Fiscal Policy," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 144(I), pages 57-83, March.
    24. Frank Bodmer, 2006. "The Swiss Debt Brake: How it Works and What Can Go Wrong," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 142(III), pages 307-330, September.
    25. Bai, Yuting & Leeper, Eric M., 2017. "Fiscal stabilization vs. passivity," Economics Letters, Elsevier, vol. 154(C), pages 105-108.

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