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Application of the Swiss Fiscal Rule to Artificial Data: A Monte Carlo Simulation

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  • Alain Geier

Abstract

The Swiss fiscal rule or "debt brake" is applied to simulated data of economic output and fiscal revenues. The budget remains almost perfectly balanced and the debt ratio stable over the medium and long term: The cyclical adjustment of the debt brake is effective in terms of its primary objective of achieving a balanced budget over the medium term. The rule also performs well with respect to the objective of taking into account the position of the economy in the cycle. In the case of a non-stationary GDP series, however, this result can not be guaranteed anymore.

Suggested Citation

  • Alain Geier, 2012. "Application of the Swiss Fiscal Rule to Artificial Data: A Monte Carlo Simulation," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 148(I), pages 37-55, March.
    • Handle: RePEc:ses:arsjes:2012-i-2
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    References listed on IDEAS

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    Cited by:

    1. Adam Pigon & Michal Ramsza, 2016. "Impact Of A Modified Hp Filter On Countercyclical Behavior Of The Swiss Fiscal Rule," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 11(4), pages 661-674, December.
    2. Adam Pigoń & Michał Ramsza, 2022. "A Comparison of German, Swiss, and Polish Fiscal Rules Using Monte Carlo Simulations," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 4, pages 17-41.

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    More about this item

    Keywords

    Balanced Budget; Debt; Deficit; Budgeting; Business Cycle;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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