Governments across the globe have responded to the threat of the Covid-19 virus by imposing substantial lockdown measures largely guided by epidemiological concerns. These lockdowns come at significant economic costs with increased risk of e.g. mass unemployment. Recently, debates have emerged...

This paper discusses the need and scope for an active fiscal stabilization policy. It is argued that the effectiveness of fiscal policy as a short run stabilizer does not depend on the long run multipliers of (balanced budget) fiscal policies. To the extent that activity can be affected by...