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Sustainability of Swiss Fiscal Policy

  • Gebhard Kirchgässner
  • Silika Prohl

We examine whether Swiss federal fiscal policy was sustainable over the period from 1900 to 2002. We perform unit root and cointegration tests for federal revenues and expenditures, taking into account a structural shift in the budgetary process related to World War II. We find sustainability over the entire period. However, splitting the sample into two sub-samples before and after World War II, the results do much less support sustainability. Finally, applying the tax smoothing model of BARRO (1979), we show that cyclical fluctuations of the output and changes in expected inflation rate are major determinants of the federal budgetdeficit over the time period considered.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1689.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1689
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  13. Stephan Danninger, 2002. "A New Rule; The Swiss Debt Brake," IMF Working Papers 02/18, International Monetary Fund.
  14. Alan J. Auerbach & Jagadeesh Gokhale & Laurence J. Kotlikoff, 1991. "Generational Accounts: A Meaningful Alternative to Deficit Accounting," NBER Chapters, in: Tax Policy and the Economy, Volume 5, pages 55-110 National Bureau of Economic Research, Inc.
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  27. Felix Andrist & Richard G. Anderson & Marcela M. Williams, 2000. "Real output in Switzerland: new estimates for 1914-47," Review, Federal Reserve Bank of St. Louis, issue May, pages 43-70.
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