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Prof. Rodrik, please see the following thoughtful post by Simon Wren-Lewis explaining why a devaluation would have been the least costly policy option. Furthermore barring deflation Latvian style - aggressive deflationary policy is more costly than a more gradual deflation (at least in theory, SWL is not that concerned about riots which you may argue are more likely in a drawn out gradual downturn).
http://mainlymacro.blogspot.com/2012/06/what-is-it-about-latvia.html
Commented Jun 10, 2012 on What I learned in Latvia at Dani Rodrik's weblog
What I learned in Latvia
I spent a few short days in Latvia last week. My meetings centered on industrial policy, which Latvia is serious about – quite interestingly for a country that is often viewed as a hotbed of conservative economics. But my time there also gave me an opportunity to reflect on the country’s much di...
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Jun 10, 2012
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