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Dynamic analysis in the Viner model of mercantilism

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  • Heng-Fu Zou

Abstract

This paper models the central theme of mercantilism in Jacob Viner's interpretation-power vs plenty-in a framework of modern theory of international finance. It is shown that, in the Viner model of mercantilism, a nation with strong mercantilist sentiment ends up with large foreign asset accumulation and high consumption in the long run; an import tariff leads to more foreign asset holding and more total consumption; furthermore, in the Viner model, the Harberger-Laursen-Metzler effect exists unambiguously: a permanent terms-of-trade deterioration causes a current account deficit in the short run.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 16 (1997)
Issue (Month): 4 (August)
Pages: 637-651

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Handle: RePEc:eee:jimfin:v:16:y:1997:i:4:p:637-651

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Web page: http://www.elsevier.com/locate/inca/30443

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References

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  1. Judd, Kenneth, 1987. "Debt and distortionary taxation in a simple perfect foresight model," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 51-72, July.
  2. Zou, Heng-fu, 1991. "Socialist economic growth and political investment cycles," Policy Research Working Paper Series 615, The World Bank.
  3. Fershtman, C. & Weiss, Y., 1991. "Social Status , Culture and Economic Performance," Papers 32-91, Tel Aviv.
  4. Heng-fu Zou, 1991. "The spirit of capitalism and long-run growth," Policy Research Working Paper Series 630, The World Bank.
  5. Obstfeld, Maurice, 1982. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," The Quarterly Journal of Economics, MIT Press, vol. 97(2), pages 251-70, May.
  6. Obstfeld, Maurice, 1981. "Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1142-61, December.
  7. Stephen J. Turnovsky, 1985. "Domestic and Foreign Disturbances in an Optimizing Model of Exchange- Rate Determination," NBER Working Papers 1407, National Bureau of Economic Research, Inc.
  8. Kenneth L. Judd, 1983. "Short-Run Analysis of Fiscal Policy in a Simple Perfect Foresight Model," Discussion Papers 559, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Heng-fu Zou, 1995. "The spirit of capitalism and savings behavior," CEMA Working Papers 79, China Economics and Management Academy, Central University of Finance and Economics.
  10. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  11. Heng-fu Zou, 1995. "A dynamic model of capital and arms accumulation," CEMA Working Papers 80, China Economics and Management Academy, Central University of Finance and Economics.
  12. Bakshi, Gurdip S & Chen, Zhiwu, 1996. "The Spirit of Capitalism and Stock-Market Prices," American Economic Review, American Economic Association, vol. 86(1), pages 133-57, March.
  13. Matsuyama, Kiminori, 1987. "Current account dynamics in a finite horizon model," Journal of International Economics, Elsevier, vol. 23(3-4), pages 299-313, November.
  14. Mansoorian, Arman, 1993. "Habit persistence and the Harberger-Laursen-Metzler effect in an infinite horizon model," Journal of International Economics, Elsevier, vol. 34(1-2), pages 153-166, February.
  15. Gurdip S. Bakshi & Zhiwu Chen, 1996. "The Spirit of Capitalism and Stock-Market Prices," CEMA Working Papers 511, China Economics and Management Academy, Central University of Finance and Economics.
  16. Irwin, Douglas A, 1991. "Mercantilism as Strategic Trade Policy: The Anglo-Dutch Rivalry for the East India Trade," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1296-314, December.
  17. Olivier Jean Blanchard, 1983. "Debt and the Current Account Deficit in Brazil," NBER Chapters, in: Financial Policies and the World Capital Market: The Problem of Latin American Countries, pages 187-198 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Gaowang Wang & Heng-fu Zou, 2012. "Economic Globalization, Mercantilism and Economic Growth," CEMA Working Papers 548, China Economics and Management Academy, Central University of Finance and Economics.
  2. Liutang Gong & Heng-fu Zou, 2001. "Military spending and stochastic growth," CEMA Working Papers 57, China Economics and Management Academy, Central University of Finance and Economics.
  3. Chang, Wen-ya & Tsai, Hsueh-fang & Lai, Ching-chong, 2002. "Anticipated foreign military threat, arms accumulation, and the current account in a small open economy," Journal of International Money and Finance, Elsevier, vol. 21(7), pages 1035-1052, December.
  4. Wang, Gaowang & Zou, Heng-fu, 2011. "Mercantilism, Foreign Asset Accumulation and Macroeconomic Policy," MPRA Paper 34519, University Library of Munich, Germany.
  5. Heng-fu Zou, 2011. "Foreign Asset Accumulation and Macroeconomic Policies in a Model of Mercantilism," CEMA Working Papers 432, China Economics and Management Academy, Central University of Finance and Economics.
  6. Gaowang Wang & Heng-fu Zou, 2011. "Foreign Asset Accumulation, Macroeconomic Policies and Mercantilism," CEMA Working Papers 461, China Economics and Management Academy, Central University of Finance and Economics.
  7. Olivier Cardi, 2007. "The Zero-root Property: Permanent vs Temporary Terms-of-trade Shocks," Review of International Economics, Wiley Blackwell, vol. 15(4), pages 782-802, 09.

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