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Sustainability of Swiss Fiscal Policy

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  • Gebhard Kirchgässner
  • Silika Prohl

Abstract

We examine whether Swiss federal fiscal policy was sustainable over the period from 1900 to 2002. We perform unit root and cointegration tests for federal revenues and expenditures, taking into account a structural shift in the budgetary process related to World War II. We find sustainability over the entire period. However, splitting the sample into two sub-samples before and after World War II, the results do much less support sustainability. Finally, applying the tax smoothing model of BARRO (1979), we show that cyclical fluctuations of the output and changes in expected inflation rate are major determinants of the federal budgetdeficit over the time period considered.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1689.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1689

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Keywords: sustainability; budget deficit; cointegration; structural breaks;

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  7. Barro, Robert J., 1979. "On the Determination of the Public Debt," Scholarly Articles 3451400, Harvard University Department of Economics.
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Cited by:
  1. Lars P. Feld & Christoph A. Schaltegger, 2009. "Political Stability and Fiscal Policy - Time Series Evidence for the Swiss Federal Level since 1849," CESifo Working Paper Series 2691, CESifo Group Munich.
  2. Lars Feld & Marcel Savioz & Jan Schnellenbach, 2010. "Gebhard Kirchgässner, 60 years on," Public Choice, Springer, vol. 144(3), pages 393-399, September.

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