A three-country Kaldorian business cycle model with fixed exchange rates: A continuous time analysis

Abstract

<p style='text-indent:20px;'>This paper analyses a three-country, fixed exchange rates Kaldorian nonlinear macroeconomic model of business cycles. The countries are connected through international trade, and international capital movement with imperfect capital mobility. Our model is a continuous time version of the discrete time three-country Kaldorian model of Inaba and Asada [<xref ref-type="bibr" rid="b22">22</xref>]. Their paper provided numerical studies of the dynamics of the three countries under fixed exchange rates. This paper provides analytical examinations of the local stability of the model´s equilibria, and of the existence of business cycles. The results are illustrated by numerical simulations.</p>