Many macroeconomists and politicans claim that fi scal austerity – getting the budget defi - cit down immediately – would be good for employment and growth. We think that fi scal stimulus is expansionary, and fi scal contraction is contractionary. There is a large and growing body of...

A self-enforcing monetary constitution has rules that agents acting within the system will uphold even in the presence of deviations from ideal knowledge and complete benevolence. It thus does not require external enforcement. What would such a constitution look like? I show that two regimes—a...