Fiscal Policy in the Aftermath of the Crisis

The financial crisis that erupted in 2007 triggered the deepest global recession since the 1930s. In many advanced economies, governments attempted to counter the recession by sizable fiscal stimulus measure. Those measures, and the fall in tax revenues due to the recession, frequently lead to sharp increases in public debt that threaten fiscal sustainability. A key fiscal policy challenge for major advanced economies will be to reduce public deficits and debt over the coming years, without harming real activity. This special issue of the Journal of Economic Dynamics and Control consists of six papers that offer novel empirical and theoretical perspectives on fiscal policy since the outbreak of the financial crisis. All papers were presented at a conference held at the European Commission in Brussels on March 2-3, 2012.