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Dynamic analysis in the Viner model of mercantilism

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  • Heng-fu Zou

    (Institute of Advanced Studies, Wuhan University
    The World Bank)

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

Paper provided by China Economics and Management Academy, Central University of Finance and Economics in its series CEMA Working Papers with number 100.

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Length: 15 pages
Date of creation: 1997
Date of revision:
Publication status: Published in Journal of International Money and Finance, Volume 16, Issue 4, August 1997, Pages 637-651
Handle: RePEc:cuf:wpaper:100

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Web page: http://cema.cufe.edu.cn/
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Keywords: spirit of capitalism; social status; money; growth;

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References

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  1. Judd, Kenneth L, 1985. "Short-run Analysis of Fiscal Policy in a Simple Perfect Foresight Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(2), pages 298-319, April.
  2. 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.
  3. Turnovsky, Stephen J., 1985. "Domestic and foreign disturbances in an optimizing model of exchange-rate determination," Journal of International Money and Finance, Elsevier, vol. 4(1), pages 151-171, March.
  4. Heng-fu Zou, 1991. "The spirit of capitalism and long-run growth," Policy Research Working Paper Series 630, The World Bank.
  5. Sen, Partha & Turnovsky, Stephen J., 1989. "Deterioration of the terms of trade and capital accumulation: A re-examination of the Laursen-Metzler effect," Journal of International Economics, Elsevier, vol. 26(3-4), pages 227-250, May.
  6. 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.
  7. Gurdip S. Bakshi & Zhiwu Chen, 1996. "The Spirit of Capitalism and Stock-Market Prices," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 511, China Economics and Management Academy, Central University of Finance and Economics.
  8. Fershtman, Chaim & Weiss, Yoram, 1993. "Social Status, Culture and Economic Performance," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 103(419), pages 946-59, July.
  9. Obstfeld, Maurice, 1981. "Macroeconomic Policy, Exchange-Rate Dynamics, and Optimal Asset Accumulation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(6), pages 1142-61, December.
  10. Zou, Heng-fu, 1991. "Socialist economic growth and political investment cycles," European Journal of Political Economy, Elsevier, vol. 7(2), pages 141-157, July.
  11. Maurice Obstfeld, 1981. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," NBER Working Papers 0686, National Bureau of Economic Research, Inc.
  12. Heng-fu Zou, 1995. "The spirit of capitalism and savings behavior," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 79, China Economics and Management Academy, Central University of Finance and Economics.
  13. Zou, Heng-fu, 1995. "A dynamic model of capital and arms accumulation," Journal of Economic Dynamics and Control, Elsevier, vol. 19(1-2), pages 371-393.
  14. Douglas A. Irwin, 1990. "Mercantilism as strategic trade policy: the Anglo-Dutch rivalry for the East India trade," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 392, Board of Governors of the Federal Reserve System (U.S.).
  15. Turnovsky, S. & Sen, P., 1988. "Deterioration Of The Term Of Trade And Capital Eccumulation A Reexamination Of The Laursen-Metzler Effect," Working Papers 88-08, University of Washington, Department of Economics.
  16. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  17. 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.
  18. Persson, Torsten & Svensson, Lars E O, 1985. "Current Account Dynamics and the Terms of Trade: Harberger-Laursen-Metzler Two Generations Later," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(1), pages 43-65, February.
  19. Matsuyama, Kiminori, 1987. "Current account dynamics in a finite horizon model," Journal of International Economics, Elsevier, vol. 23(3-4), pages 299-313, November.
  20. 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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Cited by:
  1. 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.
  2. Liutang Gong & Heng-fu Zou, 2001. "Military spending and stochastic growth," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 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. Heng-fu Zou, 2011. "Foreign Asset Accumulation and Macroeconomic Policies in a Model of Mercantilism," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 432, China Economics and Management Academy, Central University of Finance and Economics.
  5. Gaowang Wang & Heng-fu Zou, 2011. "Foreign Asset Accumulation, Macroeconomic Policies and Mercantilism," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 461, China Economics and Management Academy, Central University of Finance and Economics.
  6. Gaowang Wang & Heng-fu Zou, 2012. "Economic Globalization, Mercantilism and Economic Growth," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 548, China Economics and Management Academy, Central University of Finance and Economics.
  7. Wang, Gaowang & Zou, Heng-fu, 2011. "Mercantilism, Foreign Asset Accumulation and Macroeconomic Policy," MPRA Paper 34519, University Library of Munich, Germany.

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