Does the Swiss Debt Brake Outperform the New European Stability and Growth Pact in Terms of Stabilising Debt and Smoothing the Business Cycle? (Die Schweizer Schuldenbremse -Nachhaltiger und Konjunkturgerechter Als Der Neue Stabiltitaets- und Wachstumspakt?)

Schmollers Jahrbuch - Journal of Applied Social Science Studies, Vol. 126, No. 4, pp. 521-533, 2006

Posted: 10 Sep 2008 Last revised: 15 Jan 2009

See all articles by Carsten Colombier

Carsten Colombier

FFA Switzerland; FiFo Institute for Public Economics, University of Cologne

Date Written: September 10, 2008

Abstract

The Swiss debt brake is a fiscal rule at central government level which aims at stabilizing debt. However, business cycle fluctuations are also accounted for. This paper discusses criticism of the debt brake that it cannot feasibly simultaneously achieve either anti-cyclical or sustainable fiscal policy. Moreover, the debt brake is critically compared with the New European Stability and Growth Pact. Although some of this criticism applies to the debt brake it can be shown that the debt brake can achieve both goals. In this respect the debt brake would appear to be superior to the European Stability and Growth Pact.

Keywords: Swiss debt brake, fiscal rule, stability and growth pact, fiscal policy, European Union

JEL Classification: E62, H60

Suggested Citation

Colombier, Carsten, Does the Swiss Debt Brake Outperform the New European Stability and Growth Pact in Terms of Stabilising Debt and Smoothing the Business Cycle? (Die Schweizer Schuldenbremse -Nachhaltiger und Konjunkturgerechter Als Der Neue Stabiltitaets- und Wachstumspakt?) (September 10, 2008). Schmollers Jahrbuch - Journal of Applied Social Science Studies, Vol. 126, No. 4, pp. 521-533, 2006, Available at SSRN: https://ssrn.com/abstract=1266090

Carsten Colombier (Contact Author)

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FiFo Institute for Public Economics, University of Cologne ( email )

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