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Fiscal rules, budget deficits and budget projections

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  • Simon Luechinger
  • Christoph Schaltegger

Abstract

Fiscal rules are mentioned as instruments to commit political actors on long-term fiscal sustainability. However, fiscal rules may have stronger effects on projected than on realized fiscal outcomes because of window-dressing measures or because they alter the bargaining situation in the budget process. In our analysis for Swiss cantons, fiscal rules significantly lower the probability of projected and realized deficits with the former effect being twice as large. Projections are generally over-pessimistic but fiscal rules increase the probability of accurate projections. Thus, fiscal rules seem to substitute for finance ministers’ over-pessimistic projections intended to reign in fellow ministers and legislatures (100 words). Copyright Springer Science+Business Media, LLC 2013

Suggested Citation

  • 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.
    • Handle: RePEc:kap:itaxpf:v:20:y:2013:i:5:p:785-807
    DOI: 10.1007/s10797-012-9245-9
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    More about this item

    Keywords

    Deficit projections; Deficits; Fiscal rules; Budget process; D72; H72; H79;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H72 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Budget and Expenditures
    • H79 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Other

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