A New Rule: The Swiss Debt Brake

Author: Mr. Stephan Danninger

Volume/Issue: Volume 2002 Issue 018

Publication date: February 2002

ISBN: 9781451843651

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Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Economics- Macroeconomics , Public Finance , WP , debt , deficit , Fiscal rules , fiscal sustainability , expenditure rule , debt ratio , debt rule , budget rule , expenditure ceiling , control expenditure growth , GDP ratio , expenditure restraint , government debt target , budget surplus , government activity , spending ceiling , Budget planning and preparation , Australia and New Zealand

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Summary

The paper provides an international comparison and a comprehensive analysis of a new fiscal expenditure rule for the federal government in Switzerland. The proposed rule has two innovative features: it aims at a structurally balanced budget in the short-run by annually setting a cyclically adjusted expenditure ceiling, and it arrests the accumulation of public debt via corrections of future expenditure targets for past deviations from projected fiscal balances. The paper finds that the new rule is likely to reduce procyclical tendencies in fiscal policy and that its objectives are adequate in meeting long-run fiscal challenges arising from demographic changes.