chapter  6
Interacting two-country business fluctuations
Pages 41

Analytical propositions are indeed obtained much more easily in the KWG case than in the case of two interacting KMG economies, since in the two-country case we can indeed then economize on four laws of motion (describing the quantity adjustments in the two open KMG economies) which reduces the dimension of the considered dynamics from 14D to 10D. The economically more convincing KMG approach with its less than full capacity growth considerations is considerably more difficult to analyze analytically and is therefore excluded from consideration here. From the economic perspective we thus concentrate on the generation and transmission of international inflation by means of the KWG case and do not yet really consider Keynesian quantity driven business cycle dynamics and their transmission throughout the world economy.