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Dynamic analysis in the Viner model of mercantilism

  • Heng-fu Zou

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

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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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
Contact details of provider: Web page: http://cema.cufe.edu.cn/

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  1. 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.
  2. Chaim Fershtman & Yoram Weiss, 1991. "Social Status, Culture and Economic Performance," Discussion Papers 1007, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. 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.
  4. Zou, Heng-fu, 1991. "Socialist economic growth and political investment cycles," European Journal of Political Economy, Elsevier, vol. 7(2), pages 141-157, July.
  5. Turnovsky, S. & Sen, P., 1988. "Deterioration Of The Term Of Trade And Capital Eccumulation A Reexamination Of The Laursen-Metzler Effect," Discussion Papers in Economics at the University of Washington 88-08, Department of Economics at the University of Washington.
  6. 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.
  7. Heng-fu Zou, 1995. "'The spirit of capitalism' and long-run growth," CEMA Working Papers 94, China Economics and Management Academy, Central University of Finance and Economics.
  8. Torsten Persson & Lars E.O. Svensson, 1983. "Current Account Dynamics and the Terms of Trade: Harberger-Laursen-Metzler Two Generations Later," NBER Working Papers 1129, National Bureau of Economic Research, Inc.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  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. Matsuyama, Kiminori, 1987. "Current account dynamics in a finite horizon model," Journal of International Economics, Elsevier, vol. 23(3-4), pages 299-313, November.
  16. 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.
  17. 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.
  18. 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.
  19. 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.
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