The fiscal constitution governs the federal system and thus the competition among member states. In Switzerland tax competence and spending decisions are highly decentralised. In order to make such as system operational an intergovernmental transfer system is needed. Today it does not work in a...

This paper examines the stabilizing effects of Swiss fiscal policy. First, we find that the federation adopted a countercyclical fiscal policy in approximately 60% of all periods observed. During recessions, fiscal policy was always countercyclical and therefore helped to stabilize the economy....