ANATOMY OF MACROECONOMIC LEAKAGE:

This working paper presents a theoretical reformulation of the IS-LM model for open economies with a high dependence on imports. Based on the Unified Household Budget Constraint (Yd=C+S+Mc), the author formally demonstrates the Double Trade Penalty (2m) and the Retention Operator (μ=1/f), explaining the ineffectiveness of demand-side fiscal stimuli and the endogenous contraction of the money supply (α). It shows how industrialization and import substitution act as a de facto monetary policy.