Adapting the Swiss Debt Brake to the German Bundesländer

FiFo-CPE Discussion Paper No. 07-7

116 Pages Posted: 24 Sep 2007

See all articles by Max Groneck

Max Groneck

Stockholm School of Economics, Department of Economics

Robert C. Plachta

University of Cologne - Cologne Centre for Public Economics (CPE)

Date Written: August 23, 2007

Abstract

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

Suggested Citation

Groneck, Max and Plachta, Robert C., Adapting the Swiss Debt Brake to the German Bundesländer (August 23, 2007). Available at SSRN: https://ssrn.com/abstract=1011194 or http://dx.doi.org/10.2139/ssrn.1011194

Max Groneck (Contact Author)

Stockholm School of Economics, Department of Economics ( email )

Germany

HOME PAGE: http://https://www.hhs.se/en/Research/Departments/DE/

Robert C. Plachta

University of Cologne - Cologne Centre for Public Economics (CPE) ( email )

Albertus-Magnus-Platz
Köln, 50923
Germany

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