In the present Master’s Thesis, we examine the causes and consequences of the Swiss debt

brake, a mechanism designed to balance the Confederation's income and expenditure over a

business cycle. The paper inserts the constitutional object into Swiss economic history, to

understand how the country's economic, social, and political characteristics explain the birth

of the brake. We use the neo-realist approach to institutional change to study the causes of the

balanced budget rule. It highlights the influence of various economic, academic, and political

actors during the 1990s to stimulate economic competitiveness by liberalizing the economy

and restricting the power of the state. Certain political players with close ties to the industrial

and financial world proposed motions to reform Swiss fiscal policy, to reduce public

indebtedness, by constraining the state's share in the economy.

To study the consequences of the debt brake on the Swiss economy, we use an approach

based on fiscal space and functional finance. While Switzerland benefits from a large fiscal

space, it does not use it to achieve full resource utilization but rather uses the generated fiscal

surpluses to reduce public indebtedness. Based on sectoral accounts, this surplus has the effect

of withdrawing savings from other sectors, particularly Non-Financial Corporations (NFC). If

Switzerland's fiscal position is sustainable, it is largely thanks to the current account balance,

which accounts for a significant proportion of national income.