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Frontiers of Economics in China

ISSN 1673-3444

ISSN 1673-3568(Online)

CN 11-5744/F

Postal Subscription Code 80-978

Front. Econ. China    2018, Vol. 13 Issue (2) : 171-195
Orginal Article |
The Effects of Macroeconomic Policies in a Mercantilist Economy
Gaowang Wang1(), Heng-fu Zou2()
1. Center for Economic Research, Shandong University, Jinan 250013, China
2. China Economics and Management Academy, Central University of Finance and Economics, Beijing 100081, China
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By introducing money and foreign exchange 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     
Issue Date: 02 May 2018
 Cite this article:   
Gaowang Wang,Heng-fu Zou. The Effects of Macroeconomic Policies in a Mercantilist Economy[J]. Front. Econ. China, 2018, 13(2): 171-195.
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