The paper uses a small open economy general-equilibrium model to compare fiscal and nominal exchange rate devaluation … fiscal devaluation mimics nominal exchange rate adjustment and mitigates the output loss associated with demand rebalancing … tax shift from labour to consump-tion as standard example of fiscal devaluation remains moderate, however. …

the euro periphery fiscal devaluation programs, and show that it can account for the most salient features of the data … recent euro periphery crisis. Trade costs can limit the pass-through of internal devaluation on export prices. Using data on … relative to domestic prices in the euro periphery. Furthermore, VAT (in theory trade neutral, but in practice much higher on …