How fiscal dominance affects central banks ability to defend, Macroeconomics

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How fiscal dominance affects central banks ability to defend

Problem

Consider two countries with fixed exchange rate regimes. In one country, government authorities exert fiscal dominance. In the other, they do not. Describe how this affects the central bank's ability to defend the exchange rate peg. How might this difference in fiscal dominance affect the central bank's credibility?

The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.

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