Question: 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

Consider two countries with fixed 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 peg. How might this difference in fiscal dominance affect the central bank’s credibility?

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