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Does the Swiss Debt Brake Induce Sound Federal Finances? A Synthetic Control Analysis

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  • Christian F. Pfeil
  • Lars P. Feld

Abstract

The Swiss debt brake is widely appreciated as one of the most rationally designed fiscal rules in the world and was thus also discussed as blueprint in the debates about fiscal rules in Germany, the European Union member states and Israel. However, evidence that this rule really contributes to sound federal finances does not exist yet. We investigate the effectiveness of the Swiss debt brake by employing the Synthetic Control Method. We find that the introduction of this fiscal rule improved the budget balance by about 3.6 percentage points on average in a post-intervention period covering five years.

Suggested Citation

  • Christian F. Pfeil & Lars P. Feld, 2016. "Does the Swiss Debt Brake Induce Sound Federal Finances? A Synthetic Control Analysis," CESifo Working Paper Series 6044, CESifo.
    • Handle: RePEc:ces:ceswps:_6044
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    Cited by:

    1. Feld, Lars P. & Reuter, Wolf Heinrich, 2021. "The German "debt brake": Success factors and challenges," Freiburg Discussion Papers on Constitutional Economics 21/10, Walter Eucken Institut e.V..
    2. Roesel, Felix, 2017. "Do mergers of large local governments reduce expenditures? – Evidence from Germany using the synthetic control method," European Journal of Political Economy, Elsevier, vol. 50(C), pages 22-36.
    3. Johannes Blum & Klaus Gründler & Raphael de Britto Schiller & Niklas Potrafke, 2019. "Die Schuldenbremse in der Diskussion – Teilnehmer des Ökonomenpanels mehrheitlich für Beibehaltung," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(22), pages 27-33, November.
    4. 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.
    5. Christofzik, Désirée & Feld, Lars P. & Reuter, Wolf Heinrich & Yeter, Mustafa, 2018. "Uniting European fiscal rules: How to strenghten the fiscal framework," Working Papers 04/2018, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    6. 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.
    7. Michele Salvi & Christoph A. Schaltegger & Lukas Schmid, 2020. "Fiscal Rules Cause Lower Debt: Evidence from Switzerland’s Federal Debt Containment Rule," Kyklos, Wiley Blackwell, vol. 73(4), pages 605-642, November.
    8. Campos Vázquez, Raymundo Miguel & Rodas Milián, James Alexis, 2020. "El efecto faro del salario mínimo en la estructura salarial: evidencias para México," El Trimestre Económico, Fondo de Cultura Económica, vol. 87(345), pages 51-97, enero-mar.
    9. Michele Salvi & Christoph A. Schaltegger, 2023. "Tax more or spend less? Historical evidence from Switzerland’s federal budget plans," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(3), pages 678-705, June.
    10. Correa, Juliano & Cisneros, Elías & Börner, Jan & Pfaff, Alexander & Costa, Marcelo & Rajão, Raoni, 2020. "Evaluating REDD+ at subnational level: Amazon fund impacts in Alta Floresta, Brazil," Forest Policy and Economics, Elsevier, vol. 116(C).
    11. Feld, Lars P., 2018. "The quest for fiscal rules," Freiburg Discussion Papers on Constitutional Economics 18/09, Walter Eucken Institut e.V..

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    More about this item

    Keywords

    Swiss debt brake; cyclically adjusted budget balance; government debt; synthetic control method;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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