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Do fiscal rules cause budgetary outcomes?

Author

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  • Signe Krogstrup

    (The Graduate Institute of International Studies, Geneva)

  • Sébastien Wälti

    (Department of Economics, Trinity College Dublin)

Abstract

This paper focuses on the observed empirical relationship between fiscal rules and budget deficits, and examines whether this correlation is driven by an omitted variable, namely voter preferences. We make use of two different estimation methods to capture voter preferences in a panel of Swiss sub-federal jurisdictions. First, we include a recently constructed measure of fiscal preferences. Second, we capture preferences through fixed effects with a structural break as women are enfranchised. We find that fiscal rules continue to have a significant impact on real budget balances.

Suggested Citation

  • Signe Krogstrup & Sébastien Wälti, 2007. "Do fiscal rules cause budgetary outcomes?," Trinity Economics Papers tep0607, Trinity College Dublin, Department of Economics.
  • Handle: RePEc:tcd:tcduee:tep0607
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    References listed on IDEAS

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    More about this item

    Keywords

    Fiscal policy; fiscal rules; fiscal institutions; budget deficits; fiscal preferences; endogeneity;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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