Deutsche Bundesbank, Stiftung Geld und Währung, Kiel Institute for the World Economy and University of Kiel

Since the onset of the 2007-2008 economic crisis, the subsequent recession, and the arrival of interest rates at the zero lower bound, interest has turned toward understanding the effects of fiscal policy on macroeconomic performance, with an eye toward encouraging a more rapid recovery in the short to medium run. At the same time, national budgets have come under strain due to the decline in tax revenues and the increase in social benefits brought about by a combination of automatic stabilizers and discretionary stimulus. National governments face a tradeoff between anti-cyclical policy and timely fiscal consolidation, which reflects fiscal policymakers' objective of stabilizing the macroeconomy while also stabilizing the public debt.