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A New Rule

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  • 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.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/18.

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Length: 27
Date of creation: 01 Feb 2002
Date of revision:
Handle: RePEc:imf:imfwpa:02/18

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Related research

Keywords: Fiscal sustainability; expenditure; fiscal policy; expenditures; fiscal rules; budget balance; expenditure ceiling; expenditure growth; public debt; fiscal rule; budget surplus; expenditure restraint; public expenditure; expenditure ceilings; expenditure control; fiscal policies; government expenditures; central government expenditures; taxation; fiscal deficits; fiscal discipline; tax reform; fiscal position; fiscal objectives; tax cuts; expenditure cuts; fiscal target; public expenditures; social expenditure; government deficit; fiscal responsibility; fiscal surpluses; expenditure adjustments; expenditure categories; fiscal expenditure; budget deficit; fiscal framework; structural budget balance; tax collection; state budget; fiscal responsibility act; nominal expenditure ceiling; fiscal affairs department; fiscal policy goals; fiscal policy rules; fiscal policy rule; fiscal stance; fiscal targets; fiscal activities; fiscal policy trade; tax reduction; taxable income; tight fiscal policy; fiscal balances; budget constraint; fiscal management; fiscal measures; budgetary rules; fiscal authorities; federal government budget; composition of expenditures; discretionary fiscal policy; fiscal policy framework; fiscal strategy; fiscal frameworks; government budget; fiscal improvement; fiscal flexibility; fiscal outlook; fiscal policy frameworks; budget expenditure; revenue collection; budgetary positions; government budgets; tax revenue; fiscal adjustments; fiscal positions; fiscal affairs; fiscal response; fiscal coordination; public finance; fiscal impulse; primary expenditure; cyclical fiscal policy; fiscal self-discipline; budget imbalances; expenditure management; program expenditure; public expenditure management; total expenditures; fiscal transparency; fiscal accounts; fiscal retrenchment; fiscal adjustment;

References

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  1. S. Rao Aiyagari & Ellen R. McGrattan, 1994. "The optimal quantity of debt," Working Papers 538, Federal Reserve Bank of Minneapolis.
  2. George Kopits & Steven A. Symansky, 1998. "Fiscal Policy Rules," IMF Occasional Papers 162, International Monetary Fund.
  3. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-71, October.
  4. Alberto Alesina & Roberto Perotti, 1997. "Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 210-248, June.
  5. Becker, Gary S & Tomes, Nigel, 1979. "An Equilibrium Theory of the Distribution of Income and Intergenerational Mobility," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1153-89, December.
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Citations

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Cited by:
  1. Eric Mayer & Nikolai Stähler, 2013. "The debt brake: business cycle and welfare consequences of Germany’s new fiscal policy rule," Empirica, Springer, vol. 40(1), pages 39-74, February.
  2. 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).
  3. David Prušvic, 2010. "European Fiscal Policy Rules: First 15 Years," Politická ekonomie, University of Economics, Prague, vol. 2010(1), pages 51-69.
  4. Simon Luechinger & Christoph Schaltegger, 2013. "Fiscal rules, budget deficits and budget projections," International Tax and Public Finance, Springer, vol. 20(5), pages 785-807, October.
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. Lars P. Feld, 2010. "Sinnhaftigkeit und Effektivität der deutschen Schuldenbremse," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(3), pages 226-245, 08.
  10. Steven A. Symansky & Xavier Debrun & Natan P. Epstein, 2008. "A New Fiscal Rule," IMF Working Papers 08/87, International Monetary Fund.
  11. 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.
  12. Erik J. Lundbäck, 2008. "Medium-Term Budgetary Frameworks," IMF Working Papers 08/163, International Monetary Fund.
  13. Petia Topalova & Dan Nyberg, 2010. "What Level of Public Debt Could India Target?," IMF Working Papers 10/7, International Monetary Fund.

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