Political Stability and Fiscal Policy Time Series Evidence for the Swiss Federal Level Since 1849
39 Pages Posted: 7 Jul 2009
Date Written: June 2009
This paper explores the role of political stability on fiscal policy choices in a time-series analysis over 158 years on the Swiss federal level. We argue that the fiscal-commons problem of public finances is affected by the time-horizon of a finance minister. Arguably, the incentives for an incumbent to maintain a good reputation with sound policy decisions are stronger the longer the time-horizon of a respective term. In addition, a finance minister who succeeds to stay a long time in office normally enjoys a politically powerful position towards the parliament, the administration and the interest groups to influence policy decisions. In contrast, frequent government turnover weakens the position of the finance minister.
Keywords: political stability, fiscal policy, constitutional changes
JEL Classification: H11, H50, H61, D78
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