Test of Fiscal Sustainability and Causality Hypotheses for Switzerland

Silke Prohl

Swiss Journal of Economics and Statistics (SJES), 2010, vol. 146, issue II, 481-506

Abstract: This paper examines the causality between the Swiss federal governments revenue and expenditure over the 1900 to 2002 period by estimating the short- and longrun 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.

Keywords: Budget Deficit; Cointegration (search for similar items in EconPapers)
JEL-codes: C22 C23 H60 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ses:arsjes:2010-ii-3

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