Demand and Income Distribution in a Two-Country Kaleckian Model

This study builds a two-country Kaleckian model and investigates the effect of one country’s economic policy on both countries. In contrast to preceding studies, we consider monetary aspects as well as real aspects. Our results show that the effects on output of an increase in the nominal wage rate and in the mark-up rate differ from the results obtained from one-country Kaleckian models. Moreover, we show that the success of monetary easing in one country may depend on the other country’s policy, implying the need for policy coordination between the two countries.