Farhi, Emmanuel; Gopinath, Gita; Itskhoki, Oleg - 2012 - This version: October 18, 2012
The authors show that even when the exchange rate cannot be devalued, a small set of conventional fiscal policy instruments can robustly replicate the real allocations attained under a nominal exchange rate devaluation in a standard New Keynesian open economy environment. They perform the...
