Sustainability of Swiss Fiscal Policy

Abstract

We examine whether Swiss federal fiscal policy was sustainable over the period from 1900 to 2002. We perform unit root and cointegration tests for federal revenues and expenditures, taking into account a structural shift in the budgetary process related to World War II. We find sustainability considering the entire period. However, splitting the sample into two sub-samples before and after World War II, the results do much less support sustainability.