Published Papers 2010
Paper 2010-II-3
"Test of Fiscal Sustainability and Causality Hypotheses for Switzerland"
Silika Prohl
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.
Pages: 481-506
JEL classification: C22, C23, H60
Keywords: Budget Deficit, Cointegration
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