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Test of Fiscal Sustainability and Causality Hypotheses for Switzerland

  • Silika Prohl

This paper examines the causality between the Swiss federal governments revenue and expenditure over the 1900 to 2002 period by estimating the short- and longrun relation within an error-correction approach that places more emphasis on the long-run relation as a source of the causal link. The results suggest both that the fiscal policy is consistent with the governmental budget constraint - revenue and expenditure are cointegrated, and revenue cause expenditure and vice versa. There is also evidence that World War II had a significant impact on the stability of the cointegrating relation between revenue and expenditure.

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Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

Volume (Year): 146 (2010)
Issue (Month): II (June)
Pages: 481-506

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Handle: RePEc:ses:arsjes:2010-ii-3
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  15. James E. Payne, 2003. "A Survey of the International Empirical Evidence on the Tax-Spend Debate," Public Finance Review, , vol. 31(3), pages 302-324, May.
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