The symmetric two-country model of the world economy that was developed in the previous subsections can be used to study the issue of international policy coordination.

Since we do not wish to carry on with the rather extensive notational burden introduced in the development of this model, the insights of the two-country model are summarized by means of the following reduced form expressions for domestic and foreign output:

Y = g + Y* = g* + *g, (11.54)

where g and g* are indexes of fiscal policy, = = 1 if there is nominal wage rigidity in both countries (which is the case studied in section 2.1), = < 0 if there is real wage rigidity in both countries (see section 2.2), and, finally, < 0 and The Foundation of Modern Macroeconomics