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National and International Inequalities in Income and Wealth in a Global Growth with Free Trade and National Inflation Policies

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  • WEI-BIN ZHANG

    () (International Cooperation and Research Division Ritsumeikan Asia Pacific University, Yokohama JAPAN)

Abstract

The purpose of this paper is to study global monetary economic growth with heterogeneous households under free trade. The paper examines dynamics of global and national wealth and income distribution in association with monetary economic growth within an integrated framework. Money is introduced via the cash-in-advance (CIA) approach. We show that the dynamics of the world economy (with any number of countries) is described by a set of differential equations. We simulate equilibrium of the global economy with three countries and two types of households in each country. We also demonstrate effects of changes in technology and inflation policy. Our model demonstrates, as Grier and Grier (2007) empirically show, that the global economy exhibits absolute divergence in output levels if some determinants of steady state income are different. The study shows that as one country increases its inflation policy, the equilibrium values of the global output, consumption level and physical wealth are enhanced, and the rate of interest is lowered. The country which raises its inflation policy benefits in every aspect, but the other countries suffer in some aspects and benefit in others.

Suggested Citation

  • Wei-Bin Zhang, 2014. "National and International Inequalities in Income and Wealth in a Global Growth with Free Trade and National Inflation Policies," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 2(1), pages 22-40, May.
  • Handle: RePEc:ntu:ntugeo:vol2-iss1-14-022
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    References listed on IDEAS

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    More about this item

    Keywords

    money; global growth; trade pattern; global and national distribution of income and wealth;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • O42 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Monetary Growth Models

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