ARE THE PREDICTIONS OF THE MUNDELL-FLEMING MODEL APPLICABLE TO ARGENTINA?

Based on an extended IS-LM model incorporating the exchange rate in the money demand function, this paper finds that fiscal expansion is related with a raise in real output and causes the Argentine peso to appreciate and that monetary expansion is related with a rise in real output and causes the Argentine peso to depreciate. Except for the prediction of the ineffectiveness of fiscal expansion on real output, other predictions of the Mundell-Fleming model are applicable to Argentina.