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Economic Globalization, Mercantilism and Economic Growth

  • Gaowang Wang

    (Central University of Finance and Economics)

  • Heng-fu Zou

    (Central University of Finance and Economics)

Obstfeld (1994) shows theoretically that international economic integration accelerates economic growth of all countries in the world, which does not match the data very well. By introducing Zou (1994)'s viewpoints of mercantilism into the Obstfeld model, the paper shows that the excessive pursuits for wealth heighthen the demand for financial assets with high return and high risk in the global financial market which distorts the mechanism of financial market promoting economic growth, and hence leads to different growth performances within different countries. Specifically, for different economies, not only do the same technology or preference shocks have different growth effects, but also economic integration has different growth effects.

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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 548.

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Length: 31 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:cuf:wpaper:548
Contact details of provider: Web page: http://cema.cufe.edu.cn/

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  1. David Dollar & Aart Kraay, 2004. "Trade, Growth, and Poverty," Economic Journal, Royal Economic Society, vol. 114(493), pages F22-F49, 02.
  2. Joshua Aizenman & Jaewoo Lee, 2005. "International reserves: precautionary versus mercantilist views, theory and evidence," Proceedings, Federal Reserve Bank of San Francisco.
  3. Weil, Philippe, 1990. "Nonexpected Utility in Macroeconomics," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 29-42, February.
  4. Maurice Obstfeld., 1993. "Risk-Taking, Global Diversification, and Growth," Center for International and Development Economics Research (CIDER) Working Papers C93-016, University of California at Berkeley.
  5. Heng-fu Zou, 1997. "Dynamic analysis in the Viner model of mercantilism," CEMA Working Papers 100, China Economics and Management Academy, Central University of Finance and Economics.
  6. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
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  8. Philippe Weil, 1989. "The Equity Premium Puzzle and the Riskfree Rate Puzzle," NBER Working Papers 2829, National Bureau of Economic Research, Inc.
  9. R. C. Merton, 1970. "Optimum Consumption and Portfolio Rules in a Continuous-time Model," Working papers 58, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Epstein, Larry G & Zin, Stanley E, 1989. "Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns: A Theoretical Framework," Econometrica, Econometric Society, vol. 57(4), pages 937-69, July.
  11. Joao Tovar Jalles, 2009. "Do Oil Prices Matter? The Case of a Small Open Economy," Annals of Economics and Finance, Society for AEF, vol. 10(1), pages 65-87, May.
  12. Svensson, Lars E. O., 1989. "Portfolio choice with non-expected utility in continuous time," Economics Letters, Elsevier, vol. 30(4), pages 313-317, October.
  13. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  14. McDermott, John, 1999. " Mercantilism and Modern Growth," Journal of Economic Growth, Springer, vol. 4(1), pages 55-80, March.
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