The Debt Brake – A Guarantee for Sustainable Budgetary Policy? A Reply to Feld et al. (2024)

In the debate on the German debt brake, there is an emerging consensus in favour of reform. Most recently, Feld et al. (2024) attempted to refute the frequently voiced criticism that the debt brake hinders government investment. The synthetic control method used compares Germany’s actual investment activity with a synthetic “Germany without a debt brake”. This article attempts to address the methodological problems of the study by using the augmented synthetic control method, but irrespective of this extension, fundamentally questions the results in Feld et al. (2024).