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Abstract

The correlations and the influence of the monetary policy pursued by the central banks of developed countries, primarily by the Federal Reserve System (the central bank of the United States), on the economies of developing countries is a subject of research, especially since the outbreak of the last financial crisis. Decisions concerning shifts in attitudes in the monetary policy taken by the monetary authorities of the largest economies, influence investors’ behaviour. Due to globalization and financialization, short-term capital flows occur very quickly and on a significant scale. Argentina is an illustration of the consequences of monetary policy tapering by the FRS for the economy of a developing country. Argentina was supported during the period of disturbances by the International Monetary Fund. Nevertheless, it seems that this solution is insufficient in view of the globalization of the effects of the monetary policy pursued by the economically strongest countries.
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Abstract

We consider fiscal and monetary policy interactions in a monetary unionunder monetary leadership, when the common central bank is concerned with theaverage fiscal stance of the union. We use a static two-country monetary unionmodel to investigate the policy-mix problem under different regimes of non-cooperation, cooperation, and enforced cooperation among fiscal authorities.We find that fiscal policy is unambiguously countercyclical, a feature that ismore pronounced under fiscal policy cooperation. Monetary policy can be eithercountercyclical or procyclical. A central bank concerned about the aggregatefiscal stance is effective in stabilizing output and central budget, but at theexpense of inflation stabilization.
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