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Fiscal rules, budget deficits and budget projections

Simon Luechinger () and Christoph Schaltegger ()

International Tax and Public Finance, 2013, vol. 20, issue 5, 785-807

Abstract: Fiscal rules are mentioned as instruments to commit political actors on long-term fiscal sustainability. However, fiscal rules may have stronger effects on projected than on realized fiscal outcomes because of window-dressing measures or because they alter the bargaining situation in the budget process. In our analysis for Swiss cantons, fiscal rules significantly lower the probability of projected and realized deficits with the former effect being twice as large. Projections are generally over-pessimistic but fiscal rules increase the probability of accurate projections. Thus, fiscal rules seem to substitute for finance ministers’ over-pessimistic projections intended to reign in fellow ministers and legislatures (100 words). Copyright Springer Science+Business Media, LLC 2013

Keywords: Deficit projections; Deficits; Fiscal rules; Budget process; D72; H72; H79 (search for similar items in EconPapers)
Date: 2013
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Handle: RePEc:kap:itaxpf:v:20:y:2013:i:5:p:785-807