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The Swiss Debt Brake - Has It Been a Success?

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  • Tobias Beljean
  • Alain Geier

Abstract

This paper describes how the Swiss fiscal rule at federal level has fared since it was introduced in 2003. Generally speaking, the rule has modified the budget process and led to a better implementation of fiscal policy objectives. It is argued that the most important factor is the existence of a binding ceiling for expenditure. The design of the mechanism is important in setting the right incentives. A basic feature of the rule is its simplicity and transparency. It is argued that an increase in sophistication would eliminate this advantage without guaranteeing preferable outcomes. It appears that the rule has contributed to a substantial reduction in nominal debt. This outcome has occurred against the backdrop of a favourable economic situation (which was not anticipated) and is primarily attributable to an underestimation of both revenues and economic growth. Nominal debt reduction may not materialise to the same extent under different circumstances. It appears that systematic underspending with respect to the budget leads to a bias towards budget surpluses. In addition, there has been no visible reduction in budget quality, and the fiscal policy stance as measured by the change in the cyclically adjusted budget balance has been appropriate given the prevailing economic conditions. While some design features may be debatable, the overall rules-based approach to fiscal policy has been successful.

Suggested Citation

  • 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.
  • Handle: RePEc:ses:arsjes:2013-ii-2
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    References listed on IDEAS

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    1. Mr. George Kopits & Mr. Steven A. Symansky, 1998. "Fiscal Policy Rules," IMF Occasional Papers 1998/011, International Monetary Fund.
    2. Christoph A. Schaltegger & Martin Weder, 2010. "Fiskalpolitik als antizyklisches Instrument? Eine Betrachtung der Schweiz," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 11(2), pages 146-177, May.
    3. 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.
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    5. Alberto Alesina & Roberto Perotti, 1995. "The Political Economy of Budget Deficits," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 1-31, March.
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    7. Gabriel Di Bella & Ms. Teresa Daban Sanchez & Ms. Enrica Detragiache & Mr. Gian M Milesi-Ferretti & Mr. Steven A. Symansky, 2003. "Rules-Based Fiscal Policy in France, Germany, Italy, and Spain," IMF Occasional Papers 2003/009, International Monetary Fund.
    8. Daniel Lampart, 2005. "Die konjunkturelle Ausrichtung der Schweizer Finanzpolitik im internationalen Vergleich," KOF Working papers 05-109, KOF Swiss Economic Institute, ETH Zurich.
    9. Mr. Xavier Debrun & Mr. Natan P. Epstein & Mr. Steven A. Symansky, 2008. "A New Fiscal Rule: Should Israel “Go Swiss?”," IMF Working Papers 2008/087, International Monetary Fund.
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    Cited by:

    1. Basil Guggenheim & Mario Meichle & Thomas Nellen, 2019. "Confederation debt management since 1970," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 155(1), pages 1-23, December.
    2. Gebhard Kirchgässner, 2017. "The debt brake of the German states: a faulty design?," Constitutional Political Economy, Springer, vol. 28(3), pages 257-269, September.

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    More about this item

    Keywords

    debt; debt brake; fiscal rules; Switzerland;
    All these keywords.

    JEL classification:

    • H6 - Public Economics - - National Budget, Deficit, and Debt

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