Over the last years, Latvia’s government has managed the supposedly impossible, namely fiscal consolidation and internal devaluation. One could argue about whether those solutions were adapted to a crisis period. Quite many commentators have discussed exchange rate policy as well as fiscal policy. For instance, in July, in this column, Janis Berzins argued that there is no empirical evidence that fiscal consolidation leads to development.We were a little bit astonished by those claims, as the economic literature largely documents the medium to long term benefits of fiscal cons...
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