Abstract for: Inclusive growth and sustainable finance in connected national economies

We discuss the impact of economic connectedness upon the policies of sustainable finance in a two-country model which is based on a previous paper, where we analyzed the relationship between economic growth and consumer debt from a financial and distribution-political perspective. According to our previous single-country model we found that a rebalancing policy through achieving more income equality would be a good choice. Our latest simulations, however, show that this strategy may be undermined by free international trade. The higher the degree of free movement of goods, the more likely the two countries will, as in a Prisoners’ Dilemma, choose the policy of austerity – the worse option.