The controversy about sovereign debt cuts loomed prominently throughout crisis in the European Union (EU), as the EU legal rules were viewed to impose strict limitations on debt restructuring involving public creditors due to moral hazard concerns enshrined in the legal ban on bailouts. This...

The Swiss debt brake is widely appreciated as one of the most rationally designed fiscal rules in the world and was thus also discussed as blueprint in the debates about fiscal rules in Germany, the European Union member states and Israel. However, evidence that this rule really contributes to...

The paper investigates the fiscal effects of Swiss cantonal debt brakes by taking explicitly into account the rules' coverage. An in-depth analysis provides unique evidence that suggests the following: First, fiscal rules at the cantonal level have a negative effect on public deficits, which is...

We build a new Keynesian DSGE model consisting of two heterogeneous countries participating in a monetary union. We study how public debt consolidation in a country with high debt (like Italy) affects welfare in a country with solid public finances (like Germany). Our results show that debt...

A gradually introduced reform of local government accounting made it temporarily likely for municipalities in the German state of North Rhine-Westphalia to avoid the effective control of their budget by the authorities in charge with overseeing local government budgets and enforcing the existing...

This paper studies the long-run fiscal consequences of balanced budget rules (BBR) that are enshrined in a country's constitution. Using historical data dating back to the 19th century and applying a difference-in-difference approach we find that the introduction of a constitutional-BBR reduces...

We study a fiscal policy model in which the government is present-biased, leading to an excessive public deficit. An optimally designed fiscal rule needs to trade off the benefit of committing the government to not overspend against the benefit of granting it flexibility to react to shocks to...

The budget dispute between Italy and the European Commission in 2018 gave new impetus for the debate about the reliability of output gap estimation methods and their use for calculating structural budget balances. In this paper we review the main properties of the mainstream approaches and...

We investigate the short-term effects of fiscal adjustment on economic activity in 20 OECD countries from 1970 to 2009. We compare two approaches: the traditional approach based on changes in cyclically adjusted primary balance (CAPB) and the narrative approach based on historical records....

We extend previous work on the sustainability of the government's intertemporal budget constraint by allowing for non-linear adjustment of the fiscal variables, conditional on (i) the sign of budgetary disequilibria and (ii) the phase of the economic cycle. Further, our endogenously estimated...