The Effects of Macroeconomic Policies in a Mercantilist Economy

Gaowang Wang and Heng-Fu Zou ()

MPRA Paper from University Library of Munich, Germany

Abstract: By introducing money and foreign exchanges in the Zou (1997) model of mercantilism, the paper shows the effects of macroeconomic policies in mercantilist economies. It is shown that in the long run, consumption and foreign asset accumulation increases as a result of stronger mercantilist sentiments, permanent increases in the consumption tax, increases in the monetary growth rate and purchases of foreign bonds. In the short run, however, macroeconomic disturbances including the mercantilist sentiments, the monetary growth rate, and the consumption tax have negative effects on current consumption and positive effects on current foreign asset accumulation, while purchasing foreign bonds has positive effects on both current consumption and current foreign asset accumulation. The theoretical explorations may provide a theoretical structure for hoarding international reserves and export-led growth strategy utilized by emerging market economies.

Keywords: Foreign Asset Accumulation; Mercantilism; Money; Macroeconomic Policies (search for similar items in EconPapers)
JEL-codes: E52 F31 F41 (search for similar items in EconPapers)
Date: 2011-08-25, Revised 2016-08-25
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Related works:
Journal Article: The Effects of Macroeconomic Policies in a Mercantilist Economy (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:73305

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