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  • Open Access

Test of fiscal sustainability and causality hypotheses for Switzerland

  • 1
Swiss Journal of Economics and Statistics2010146:BF03399324

https://doi.org/10.1007/BF03399324

  • Published:

Summary

This paper examines the causality between the Swiss federal governments revenue and expenditure over the 1900 to 2002 period by estimating the short- and long-run relation within an error-correction approach that places more emphasis on the long-run relation as a source of the causal link. The results suggest both that the fiscal policy is consistent with the governmental budget constraint — revenue and expenditure are cointegrated, and revenue cause expenditure and vice versa. There is also evidence that World War II had a significant impact on the stability of the cointegrating relation between revenue and expenditure.

JEL-Classification

  • C22
  • C23
  • H60

Keywords

  • Budget Deficit
  • Cointegration

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