Long shunned as slow and ill timed, the response to the Covid-19 pandemic initiated a reassessment of fiscal policy as stabilisation tool. At the same time, there is ample evidence that major economic downturns produce lasting effects on real GDP in spite of active fiscal policy interventions....

This paper investigates how numerical fiscal rules affect government investment in the EU and disentangles their effect over the business cycle. Public investment seems to be generally susceptible to cutbacks during recessions. Fiscal rules demonstrate heterogeneous effects, depending on their...