Political Economy and General Equilibrium Analysis in an Open Economy
WORKING PAPER
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This paper uses a simple two-country Kalecki-Keynes set-up for general equilibrium analysis.
Considering positive feed-back effects of increased domestic import demand ameliorates some of the bleak results about international trade. Integrating an economy can lead to the increase of income in all countries, but also to the opposite. The overall outcome depends on the structural characteristics of the domestic and foreign economies, giving international coordination of economic policy great importance.