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Application of the Swiss Fiscal Rule to Artificial Data: A Monte Carlo Simulation

  • Alain Geier
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    The Swiss fiscal rule or "debt brake" is applied to simulated data of economic output and fiscal revenues. The budget remains almost perfectly balanced and the debt ratio stable over the medium and long term: The cyclical adjustment of the debt brake is effective in terms of its primary objective of achieving a balanced budget over the medium term. The rule also performs well with respect to the objective of taking into account the position of the economy in the cycle. In the case of a non-stationary GDP series, however, this result can not be guaranteed anymore.

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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): 148 (2012)
    Issue (Month): I (March)
    Pages: 37-55

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    Handle: RePEc:ses:arsjes:2012-i-2
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    1. Robert P. Hagemann, 1999. "The Structural Budget Balance; The Imf's Methodology," IMF Working Papers 99/95, International Monetary Fund.
    2. Christoph A. Schaltegger & Martin Weder, 2009. "Fiskalpolitik als antizyklisches Instrument? Eine Betrachtung der Schweiz," CREMA Working Paper Series 2009-24, Center for Research in Economics, Management and the Arts (CREMA).
    3. Antonio Fatás & Ilian Mihov, 2003. "The Case For Restricting Fiscal Policy Discretion," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1419-1447, November.
    4. 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.
    5. Daniel Lampart, 2005. "Die konjunkturelle Ausrichtung der Schweizer Finanzpolitik im internationalen Vergleich : Ex-ante- vs. Ex-post-Betrachtung," KOF Working papers 05-109, KOF Swiss Economic Institute, ETH Zurich.
    6. Alberto Alesina & Roberto Perotti, 1995. "The Political Economy of Budget Deficits," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 1-31, March.
    7. Edward M. Gramlich, 1990. "Fiscal Indicators," OECD Economics Department Working Papers 80, OECD Publishing.
    8. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
    9. Teresa Dabán Sánchez & Steven A. Symansky & Gian-Maria Milesi-Ferretti & Enrica Detragiache & Gabriel Di Bella, 2003. "Rules-Based Fiscal Policy in France, Germany, Italy, and Spain," IMF Occasional Papers 225, International Monetary Fund.
    10. 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.
    11. Alan J. Auerbach, 2008. "Federal Budget Rules: The US Experience," NBER Working Papers 14288, National Bureau of Economic Research, Inc.
    12. H. Badinger, 2009. "Fiscal rules, discretionary fiscal policy and macroeconomic stability: an empirical assessment for OECD countries," Applied Economics, Taylor & Francis Journals, vol. 41(7), pages 829-847.
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