Adapting the Swiss Debt Brake to the German Bundesländer
FiFo-CPE Discussion Paper No. 07-7
116 Pages Posted: 24 Sep 2007
Date Written: August 23, 2007
This paper analyses the shortcomings of the current budget rules for the Bundesländer, especially the definition of public investment that is used as a deficit ceiling in Germany. Two alternative budget rules are analysed, the Swiss debt brake as well as a version incorporating a golden rule presented by the German Council of Economic Experts. A simulation reveals the necessary consolidation path, the loss of benefits, and the recursive development of public debt. In addition to the standard simulation method we present a politico-economic approach that leads to new results.
Note: Downloadable document is in German.
Keywords: public debt, German Bundesländer, debt brake, golden rule, public investment
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