IDEAS home Printed from https://ideas.repec.org/a/ses/arsjes/2006-iii-1.html
   My bibliography  Save this article

The Swiss Debt Brake: How it Works and What Can Go Wrong

Author

Listed:
  • Frank Bodmer

Abstract

After a decade with large budget deficits, Switzerland introduced a debt brake in 2002. It is an expenditure rule with sets a limit on expenditure both during boom and during recession periods and applies to the federal budget and account. Judging from simulations using historical data, the mechanism works more or less as intended. There is a sanction mechanism present since deviations from the expenditure limit have to be corrected in the future. Short-term fixes are excluded to some degree since extraordinary revenue is not included in the mechanism. However, the debt brake has a number of weak spots which could lead to a failure to achieve the target of balanced accounts.

Suggested Citation

  • 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.
  • Handle: RePEc:ses:arsjes:2006-iii-1
    as

    Download full text from publisher

    File URL: http://www.sjes.ch/papers/2006-III-1.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Bodmer Frank, 2006. "Warum die Direkte Demokratie den Anstieg der Staatsausgaben in der Schweiz nicht verhindern konnte," Zeitschrift für Wirtschaftspolitik, De Gruyter, vol. 55(3), pages 262-287, December.
    2. Gian Maria Milesi-Ferretti, 1997. "Fiscal Rules and the Budget Process," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 56(1-2), pages 5-40, June.
    3. Buti, Marco & Eijffinger, Sylvester C.W. & Franco, Daniele, 2003. "Revisiting the stability and growth pact: grand design or internal adjustment?," Seminarios y Conferencias 6567, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    4. Bohn, Henning & Inman, Robert P., 1996. "Balanced-budget rules and public deficits: evidence from the U.S. states," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 45(1), pages 13-76, December.
    5. Barro, Robert J, 1979. "On the Determination of the Public Debt," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 940-971, October.
    6. Henning Bohn & Robert P. Inman, "undated". "Balanced Budget Rules and Public Deficits: Evidence from the U.S. States (Reprint 060)," Rodney L. White Center for Financial Research Working Papers 10-96, Wharton School Rodney L. White Center for Financial Research.
    7. Tamim Bayoumi & Barry Eichengreen, 1995. "Restraining Yourself: The Implications of Fiscal Rules for Economic Stabilization," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 32-48, March.
    8. Alberto Alesina & Roberto Perotti, 1995. "The Political Economy of Budget Deficits," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 1-31, March.
    9. Stephan Danninger, 2002. "A New Rule; The Swiss Debt Brake," IMF Working Papers 02/18, International Monetary Fund.
    10. George Kopits & Steven A. Symansky, 1998. "Fiscal Policy Rules," IMF Occasional Papers 162, International Monetary Fund.
    11. Marco BUTI & Daniele FRANCO & Hedwig ONGENA, 1997. "Budgeetary Policies during Recessions : Retrospective Application of the Stability and Growth Pact” to the Post-War Period," Discussion Papers (REL - Recherches Economiques de Louvain) 1997041, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    12. Lars P Feld & Gebhard Kirchgässner, 2001. "The political economy of direct legislation: direct democracy and local decision-making," Economic Policy, CEPR;CES;MSH, vol. 16(33), pages 329-367, October.
    13. von Hagen, Jürgen, 1998. "Budgeting institutions for aggregate fiscal discipline," ZEI Working Papers B 01-1998, University of Bonn, ZEI - Center for European Integration Studies.
    14. Michael Kell, 2001. "An Assessment of Fiscal Rules in the United Kingdom," IMF Working Papers 01/91, International Monetary Fund.
    15. Christian Müller, 2004. "Anmerkungen zur Schuldenbremse," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 73(3), pages 491-501.
    16. James M. Poterba, 1996. "Do Budget Rules Work?," NBER Working Papers 5550, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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 Group Munich.
    2. 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.
    3. Marianne Yousseff ISKANDAR, 2016. "The Effectiveness of Fiscal Rules - The Case of Switzerland," Journal of Social and Administrative Sciences, KSP Journals, vol. 3(3), pages 264-267, September.
    4. Steven A. Symansky & Xavier Debrun & Natan P. Epstein, 2008. "A New Fiscal Rule; Should Israel “Go Swiss?”," IMF Working Papers 08/87, International Monetary Fund.
    5. Bai, Yuting & Leeper, Eric M., 2017. "Fiscal stabilization vs. passivity," Economics Letters, Elsevier, vol. 154(C), pages 105-108.
    6. Tobias Beljean & Alain Geier, 2013. "The Swiss Debt Brake - Has It Been a Success?," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 149(II), pages 115-135, June.

    More about this item

    Keywords

    Switzerland; budget rules; expenditure limits; deficit bias;

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ses:arsjes:2006-iii-1. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Steiner). General contact details of provider: http://edirc.repec.org/data/sgvssea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.