Gold Value with Tradable and Non-Tradable Goods in a Multi- Country Growth Model with Free Trade

Zhang, Wei-Bin Article Gold Value with Tradable and Non-Tradable Goods in a MultiCountry Growth Model with Free Trade Economic Review: Journal of Economics and Business Provided in Cooperation with: Faculty of Economics, University of Tuzla Suggested Citation: Zhang, Wei-Bin (2016) : Gold Value with Tradable and Non-Tradable Goods in a MultiCountry Growth Model with Free Trade, Economic Review: Journal of Economics and Business, ISSN 2303-680X, University of Tuzla, Faculty of Economics, Tuzla, Vol. 14, Iss. 1, pp. 35-52, https://er.ef.untz.ba/index.php/er/article/view/113 This Version is available at: https://hdl.handle.net/10419/193856 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by-nc-nd/4.0/ . Economic Review – Journal of Economics and Business, Vol. XIV, Issue 1, May 2016 /// * Ritsumeikan Asia Pacific University, Japan, [email protected] /// GOLD VALUE WITH TRADABLE AND NON-TRADABLE GOODS IN A MULTI-COUNTRY GROWTH MODEL WITH FREE TRADE Wei-Bin Zhang * ABSTRACT The purpose of this study is to examine gold price in global markets. We introduce gold into a general dynamic equilibrium growth model with multiple countries and free trades between countries. The model is developed by integrating the Solow growth model, the Uzawa two-sector growth model, and the Oniki–Uzawa trade model within a comprehensive framework. The model is built for any number of national economies and each national economy consists of one tradable and one non-tradable sectors. National economies are different in population, technologies, propensities to save, propensity to use gold, and propensities to consume. We show that the dynamics of the J -country world economy can be described by J differential equations. We simulate the model to demonstrate the existence of an equilibrium point, motion of the dynamic system, and (local) stability of the equilibrium point. We also demonstrate how changes in the propensities to use, the populations, the propensities to save, and the total factor productivities affect global economic development. Keywords: trade pattern, gold value, tradable and non-tradable, economic growth, wealth accumulation JEL: O4, F11 1. INTRODUCTION It is almost trivial to mention the importance of studying dynamics of gold value in modern globalizing economies. Nevertheless, one might be surprised to know that economics still lacks a formal analytical (mathematical) framework to study how the price(s) of gold is determine in global market. The contemporary global free trade with instantaneous information flows without geographical barriers has made the motion of price gold a global concern. Nevertheless, dynamics of gold price has almost been neglected in the literature of economic dynamics with microeconomic foundation. The main reason for this lack of interest is that economics does not have a proper analytical framework to take account of the economic mechanisms of gold price determination within a general analytical framework with microeconomic foundation. The unique feature of this paper is introduction of gold into the neoclassical growth model. “What is gold? Is it money, currency, an investment or wealth? … Gold is whatever its users think it is. And … the vast majority of the above-ground gold, today somewhere around 165,000 tons, is held by people who understand it as wealth.” (FOFOA, 2012). Gold plays the role of storing value. It is owned as a diversified share portfolio. It is also used for decoration and a sign of social status. It is held as a symbol of power and wealth. Possible multiple roles of gold in social and economic life explain partly why the value of gold has never been properly analyzed in economic theory. We emphasize dynamics of gold value as determinants of gold values are not like most other commodities. On the supply side the amount of gold stock changes but very slowly. On the demand side, most of gold is used 35 /// . Zhang W. /// Economic Review – Journal of Economics and Business, Vol. XIV, Issue 1, May 2016 for jewelry, coin collectors and central banks, with less than 10% used by industrial production (Thomas, 2015). There are some dynamic models on gold prices (Barro, 1979; Bordo and Ellson, 1985; Dowd and Sampson, 1993; Chappell and Dowd, 1997). As wealth accumulation and portfolio structure can be carried in form of holding gold and accumulating physical wealth, dynamics of gold price should be closely related to physical capital accumulation and other variables. Moreover, as national markets are increasingly integrated, gold price cannot be properly treated without taking account of international trade. We study dynamic interdependence between economic growth, structural change, and gold price in well-integrated global markets. This study is primarily concerned with dynamics of gold value in an analytical framework with interactions among wealth and physical capital accumulation and trade patterns between multiple national economies. In our approach global economic growth is mainly enforced by physical capital accumulation. As gold may be held as wealth, the preference for using and holding gold will also make a contribution to economic growth and global trade pattern formation. The global growth mechanism of physical accumulation is based on the Solow growth model. We describe international trade patterns on the basis of the dynamic trade models with accumulating capital developed by Oniki and Uzawa and others (for instance, Oniki and Uzawa, 1965; Frenkel and Razin, 1987; Sorger, 2002; and Nishimura and Shimomura, 2002). The Oniki-Uzawa model is constructed for the two-country with two goods. We use tradable good and non-tradable good rather than capital goods and consumer goods as in the Oniki-Uzawa model. Distinction between tradable good and non-tradable good is significant for explaining the terms of trade (Mendoza, 1995; Stockman and Tesar, 1995), for explaining the exchange rate (Stulz, 1987; Stockman and Dellas, 1989; Backus and Smith, 1993; Rogoff, 2002); for dealing with current account dynamics (Edwards, 1989), or for solving the home premium puzzle (Baxter et al., 1998; Pesenti and van Wincoop, 2002). A reason for this distinction is given by Backus and Smith (1993:1) as follows: “The mechanism is fairly simple. Although the law of one price holds, in the sense that each good sells for a single price in all countries, PPP may not: price indexes combine prices of both traded and nontraded goods, and because the latter are sold in only one country their prices, and hence price indexes, may differ across countries.” This paper introduces gold into the multi-country growth models with international trade and economic structure proposed by Zhang (2010, 2015). The analytical framework treats the global economy as an integrated whole. The economic system is built on the basis of the Solow model, the Uzawa two-sector model and the Oniki-Uzawa trade model. Different from the growth models with the Ramsey approach, we use the alternative utility function proposed by Zhang (1993) to determine saving and consumption. We analyze trade issues within the framework of a simple international macroeconomic growth model with perfect capital mobility. The rest of the paper is organized as follows. Section 2 defines the basic model. Section 3 shows how we solve the dynamics and simulates the motion of the global economy. Section 4 carries out comparative dynamic analysis to examine the impact of changes in some parameters on the motion of the global economy. Section 5 concludes the study. The appendix proves the main results in Section 3. 2. THE MODEL The model in this study is developed within the framework of the neoclassical growth theory with international trade. Most neoclassical growth models are based on the pioneering 36 . Economic Review – Journal of Economics and Busines, Vol. XIV, Issue 1, May 2016 /// /// works of Solow (1956). The standard neoclassical growth theory assumes that capital and labor are substitutes for one another with the result that the long-run growth path of the economy is one of full employment. The Solow model has been extended and generalized in many studies (e.g., Burmeister and Dobell, 1970; Azariadis, 1993; Barro and Sala-i-Martin, 1995). The world economy consists of multiple countries, indexed by ....,,1 Jj  Country j has a fixed population, , j N ( Jj ...,,1 ). In order to describe national economies, we follow the Uzawa model by assuming that each economy has two sectors. We call them respectively tradable sector and non-tradable sector. Although the production side of our model is based on the neoclassical growth approach, we use an alternative approach to consumer behavior proposed by Zhang (1993). We assume that all the economy can produce a homogenous tradable commodity (see also Ikeda and Ono, 1992). The commodity is like the commodity in the Solow model which can be consumed and invested. Each economy can thus produce one (durable) good in the global economy and one non-tradable (national) good. Households own the assets of the economy and distribute their incomes to consume; and to save. Production sectors use capital and labor. Exchanges take place in perfectly competitive markets. Production sectors sell their product to households or to other sectors and households sell their labor and assets to production sectors. Factor markets work well; factors are inelastically supplied and the available factors are fully utilized at every moment. Saving is undertaken only by households, which implies that all earnings of firms are distributed in the form of payments to factors of production. We omit the possibility of the hoarding of output in the form of nonproductive inventories held by households. We assume that the global economy has a fixed amount of gold owned by households. Gold can be sold in free markets without any friction and transaction costs. The assumption of fixed amount of gold is strict requirements (Barro, 1979; Barsky and Summers, 1988; and Chappell and Dowd, 1997). Gold mining is an important industry and new supply brings about changes in gold markets. For the simplicity of analysis, we omit these complicated issues. Let price be measured in terms of the tradable good and the price of the good be unit. We denote wage and interest rates by   twj and   ,trj respectively, in country .j Capital depreciates at a constant exponential rate j  in country ,j being independent of the manner of use within each country. Depreciation rates may vary between countries. Let   tpg and   tpjs denote the (internationally equal) price of gold and the price of non-tradable good. We use subscript index, i and s to stand for tradable good sector and non-tradable good sector, respectively, in country .j We use   tNjm and   tKjm to stand for the labor force and capital stocks employed by sector m in country .j Let   tFjm stand for the output level of sector m in country .j 2.1. The labor supply The aggregated labor force   tNj of country j is given by , jjj NhN  (1) where j h is the level of human capital in country .j 2.2. Production functions We assume that production of sector   qj, is to combine ‘qualified labor force’,   ,tNjq and physical capital,   .tKjq We use the conventional production function to describe 37 /// . Zhang W. /// Economic Review – Journal of Economics and Business, Vol. XIV, Issue 1, May 2016 the relationship between inputs and output. The production process is described by       ,1,0,,,  jqjqjqjqjqjqjqjqjq AtNtKAtF jqjq   (2) where ,, jqjq A  and jq  are positive parameters. The production functions are neoclassical. They are homogeneous of degree one with the inputs. In this study, we assume that levels of human capital are exogenous and total factor productivities are fixed. 2.3 Marginal conditions Each production sector chooses the two variables   tKji and   tNji to maximize its profit. The marginal conditions are             ,, tN tF tw tK tF tr ji jiji j ji jiji j    (3)                 ,, tN tFtp tw tK tFtp tr js jsjsjs j js jsjsjs j    (4) where j  is depreciation rate of physical capital in country .j 2.4. Choice between physical wealth and gold This study assumes that gold is privately owned by households. Gold can be sold and bought in free markets without any friction and transaction costs. Gold use will not waste it and it cannot regenerate itself. Households can own gold and physical wealth. In order to model the cost of keeping and using gold, we assume that gold can be “rented” through markets for decoration use. We consider that the gold which is owned by the representative household can be used either by the household for decoration or rented out to other households. The rent of gold is denoted by   .tRg Consider now an investor with one unity of money. He can either invest in capital good thereby earning a profit equal to the net own-rate of return   tr or invest in gold thereby earning a profit equal to the net own-rate of return     ./ tptR gg As we assume capital and gold markets to be at competitive equilibrium at any point in time, two options must yield equal returns, i.e.       .tr tp tR g g (5) This equation enables us to determine choice between owning gold and (physical) wealth. It is obvious that the assumption is made under many strict conditions. For instance, we neglect any transaction costs and any time needed for buying and selling. Expectations on gold are complicated. It should be noted that if the expected returns for the two assets in the future are equal, equation (5) may hold. Equation (5) also implies perfect information. 2.5. Consumer behavior Consumers decide consumption levels of goods and gold, as well as on how much to save. This study uses the approach to consumers’ behavior proposed by Zhang (1993). We denote respectively the representative household’s physical wealth by   ,tkj the amount of gold by   .tgj The total value of wealth owned by the household   taj is the sum of the two assets’ values         .tgtptkta jgjj  (6) 38 . Economic Review – Journal of Economics and Busines, Vol. XIV, Issue 1, May 2016 /// /// Per capita current income from the interest payment     ,tktr j the wage payment   ,twj and the gold interest income     tgtR jg is             .tgtRtwhtktrty jgjjjj  (7) We call   tyj the current income. The per capita disposable income is given by       . ˆtatyty jjj  (8) The disposable income is used for saving and consumption. At each point in time, the representative household would distribute the total available budget between saving   ,tsj consumption of tradeable good   ,tcj nontradable good   ,tcjs and use of gold for decoration   . ˆtgj The budget constraint is given by               . ˆˆ tytgtRtstctptc jjgjjsjsj (9) The representative household has four variables,   ,tsj   ,tcj   ,tcjs and   , ˆtgj to decide. The consumer’s utility function is specified as follows           ,0,,,, ˆ0000 0000  jjjjjjjsjj tstgtctctU jjjj   in which , 0j  , 0j  , 0j  and j0  are the household’s elasticities of utility with regard to tradable good, nontradable good, gold decoration, and saving. We call , 0j  , 0j  , 0j  and j0  propensities to consume tradable good, to consume non-tradable good, to use gold, and to hold wealth, respectively. Maximizing   tUj subject to (9) yields                     , ˆ , ˆˆ , ˆ , ˆtytstytgtRtytctptytc jjjjjjgjjjsjsjjj   (10) where . 1 ,,,, 0000 0000 jjjj jjjjjjjjjjjjj     2.7. Wealth accumulation According to the definition of   ,tsj the change in the household’s wealth is given by       .tatsta jjj   (11) The equation simply states that the change in wealth is equal to the saving minus the dissaving. 2.8. Gold owned by households The gold owned by the population is equal to the available amounts of the asset   . 1 GNtg J jjj    (12) 2.9. Gold being fully used for decoration The amount of gold used for decoration by the population is equal to the total gold   . ˆ 1 GNtg J jjj    (13) 2.10. Market clearing in non-tradable good markets The demand for non-tradable good equals the supply at any point in time in each country     .tFNtc jsjjs  (14) 2.11. National capital stock is fully employed The national capital stock is fully employed       .,...,1, JjtKtKtK jjsji  (15) 39 /// . Zhang W. /// Economic Review – Journal of Economics and Business, Vol. XIV, Issue 1, May 2016 2.12. National physical wealth being owned by the domestic households     .,...,1, 1 JjtKNtk j J jjj    (16) 2.13. Full employment of the labor force We assume that the labor force is fully employed     . jjsji NtNtN  (17) 2.14. Market clearing in tradable good markets The total capital stock in international markets employed by the production sectors is equal to the total wealth owned by all the countries. That is       . 11    J jjj J jjNtktKtK (18) The world production is equal to the world consumption and world net savings. That is           , 1 tFtKtKtStC J jjj     where             .,, 111    J jji J jjj J jjj tFtFNtstSNtctC 2.15. International trade The trade balances of the economies are given by           .,...,1, JjtrtKtKtE jjj  (19) When   tEj is positive (negative), we say that country j is in trade surplus (deficit). When   tEj is zero, country sj' trade is in balance. Equations (19) imply   .0 1    J jjtE We built the model with trade, economic growth, physical and gold distribution in the world economy in which the domestic markets of each country are perfectly competitive while, international product, gold and capital markets are freely mobile. The model synthesizes main ideas in economic growth theory and trade theory in a comprehensive framework. The model is built on many strict assumptions. Nevertheless, from a structural point of view the model is general in the sense that some well-known models in economics can be considered as special cases. For instance, if the countries are identical and human capital is constant, our model is structurally similar to the neoclassical growth model by Solow (1956) and Uzawa (1961, 1963). Our model is also structurally similar to the Oniki-Uzawa trade model (Oniki and Uzawa, 1965). It is built on the basis of the Uzawa-Lucas two sector model. 3. THE DYNAMICS, EQUILIBRIUM AND STABILITY The economic system contains many variables. These variables are nonlinearly related. For illustration, the rest of the study simulates the model. In order to simulate the model with computer, we provide a computational procedure so that one can easily follow the motion of the economic system with any set of parameters and initial conditions. In the appendix, we show that the dynamics of the economy can be expressed as J differential equations. First, we introduce a variable   tz1 by 40 . Economic Review – Journal of Economics and Busines, Vol. XIV, Issue 1, May 2016 /// ///       . 1 1tw tr tz j    We now show that the dynamics can be expressed by differential equations with   tz1 and     taj      tata J ,..., 2  as the variables. Lemma The motion of J variables,   , 1tz and     ,taj is given by the following J differential equations          ,, 111 tatztz j            ,,...,2,, 1Jjtatzta jjj   (20) where   t j  are functions of   tz1 and     taj defined in the appendix. The values of the other variables are given as functions of   tz1 and     taj at any point in time by the following procedure:   tr and   twj by (A2) →   tzj by (A3) →   ta1 by (A3) →   tpjs by (A4) →   tNjs by (A10) →   tNji by (A11) →   tKji and   tKjs by (A1) →       tKtKtK jijsj →   tK by (18) →   tpg by (A8) →   tRg by (5) →   tyj ˆ by (A6) →   tFjq by (1) →   ,tcj   ,tcjs   , ˆtgj and   tsj by (10). For simulation, we specify the values of the parameters. We consider that the world consists of three national economies, i.e., .3J We specify the parameter values as follows ,01.0,06.0,06.0,7.0 ,015.0,06.0,06.0,75.0,02.0,06.0 ,06.0,8.0,9.0,1,1.1,1,1.1,2.1 ,34.0,34.0,34.0,32.0,32.0,34.0,05.0 ,055.0,05.0,1,3,5,10,40,20,10 30303030 202020201010 1010321321 3213213 21321321           sssiii sssiii AAAAAA hhhGNNN Country 2,1 and s'3 populations are respectively 20,10 and .40 Country 3 has the largest population. Country 1 has the highest human capital and Country 2 is next. The physical capital depreciation rates of the three economies are approximately .05.0 The total factor productivities are different between three economies. Country 1 ’s total factor productivity is highest and Country 3 ’s total factor productivity is lowest. The output elasticities with respect to labor and capital also vary between countries. We specify the values of the parameters, ji  and js  in the Cobb-Douglas productions approximately equal to .3.0 The household preferences of the three economies also vary. As we already provided the procedure to follow the motion of each variable in the system, it is straightforward to plot the motion with computer. We specify the initial conditions as follows       .3.90,290,08.00 321  aaz The motion of the system is given in Figure .1 In the figure, the GDPs   tYj are defined as follows . jsjsjijFpFY  Because of the chosen initial values, the global wealth and all the GDP are enhanced over time. The rate of interest rises in association with the raise in the wage rates. The prices of the nontradable goods fall over time. The price and rent 41 /// . Zhang W. /// Economic Review – Journal of Economics and Business, Vol. XIV, Issue 1, May 2016 of gold are increased. The capital stocks employed by the three economies are increased. The output level of country s'1 tradable sector is reduced and the output level of the non-tradable sector is increased. Country s'1 tradable sector employs less capital stock and labor force while the country’s non-tradable sector employs more capital good and labor force. The output levels of country s'2 two sectors are slightly increased. Country s'2 tradable sector employs more capital stock and more labor force, and the country’s nontradable sector employs more capital good and less labor force. The output level of country s'3 tradable sector is increased and the output level of the non-tradable sector is reduced. Country s'3 tradable sector employs more capital stock and labor force and the nontradable sector employs less capital good and labor force. The representative household in Country owns more wealth, consumes the two goods more and uses more gold. The representative households’ wealth levels, consumption levels of tow goods, and amount of gold-use in the other two economies are slightly changed. As shown in Figure 1, different countries will not experience convergence in per capita income, consumption and wealth in the long term as they are different in preferences and total productivities. There are extensive discussions about income and wealth convergence between nations in the literature of economic growth and development. The literature provides little insights into the issues as most of these studies are based on the insights from analyzing models of closed economies (Barro and Sala-i-Martin, 1995). As economics lacks analytical frameworks for analyzing global growth and trades with microeconomic foundation, theoretical economics fails to discuss issues related to global income and wealth convergence. For instance, the conclusions from the Solow model for closed economies are often used to discuss issues related to income inequalities between countries. The Solow model predicts that convergence in income levels among closed countries is achieved by faster accumulation of physical capital in the poor countries. In a recent empirical study on the determinants of economic growth and investment with a panel Figure 3.1. The Motion of the Global Economy 42 . Economic Review – Journal of Economics and Busines, Vol. XIV, Issue 1, May 2016 /// /// 6. APPENDIX By (3) we obtain , jqjq jq j j jK N w r z      (A1) where . jq jq jq     From (A1) and (3), we obtain   , 1jjj jq zzr    (A2) where . ji jijijijA    From (A2) we also have   . /1 1 ji j j j r zz             (A3) From (A1) we have   . 1 j j jz r zw    From (4) we have   . 1 jsjs jjjs js A zw zp jsjs    (A4) From (6)-(8)     .1 ˆjggjjjj gpRwhkry  (A5) Insert (5) in (A5)   .1 ˆjjjj whary  (A6) From (A6) and (10)   ,1 ˆjjjjjjg whargrp   (A7) where we also use (5). Multiplying the two sides of (A7) with j N and then adding the resulted equations, we have , 1 1G WaRp J jjjg           (A8) where   . 1 ,1 1 1 1         J jjjjjjjj wNh r zWN r R  From jjjsjs ycp ˆ   and (14) , ˆ jsjs jjj js fp Ny N   (A9) where ./ jsjsjs NFf  Insert (A6) in (A9) , 0jjjjs annN  (A10) where       ., 1 101 jsjs jjjj j jsjs jj jfp wNh zn fp Nr zn     From (17) and (A10) . 0jjjjji annNN  (A11) Multiplying (12) with g p and adding (18) to the resulted equation, we have 49 /// . Zhang W. /// Economic Review – Journal of Economics and Business, Vol. XIV, Issue 1, May 2016 . 11    J jjj J jjg NaKGp (A12) Insert (15) and then (A1) in (A12) . 1 11            J jjj J jjjs js ji ji gNa z NN Gp  (A13) Insert (A8) in (A13)   . 1 11 WaRN z NN J jjjj J jjjs js ji ji            (A14) Insert (A10) and (A11) in (A14) , 0 1 WWa z n RN J jj j jj jj             (A15) where   . 11 , 1 0 10 jijs j J jj jj jji j z n z N zW                Solve (A15) with 1 a as the variable    ,, 1 1 1 11 2 011                          z n RNa z n RNWWaza j J jj j jj jjj  (A16) where     .,..., 2Jj aaa  It is straightforward to check that all the variables can be expressed as functions of 1 z and   j a at any point in time as follows: r and j w by (A2) → j z by (A3) → 1 a by (A3) → js p by (A4) → js N by (A10) → ji N by (A11) → ji K and js K by (A1) → jijsjKKK  → K by (18) → g p by (A8) → g R by (5) → j y ˆ by (A6) → jq F by (1) → , j c , js c , ˆj g and j s by (10). From this procedure and (11), we have    ,, 11101 asaza j  (A17)    .,...,2,, 1Jjasaza jjjjj   (A18) Taking derivatives of (A16) with respect to t yields . 2 1 1 1      J jj ja z z a  (A19) From (A17) and (A19), we have    ., 1 1 2 0111                       za azz J jj jj  (A20) We determine the motion of the system with (A18) and (A20) and the remaining variables by the procedure provided before. In summary, we proved the lemma. 7. REFERENCES Azariadis, C. (1993) Intertemporal Macroeconomics. Oxford: Blackwell. Backus, D.K. and Smith, G.W. (1993) Consumption and Real Exchange Rates in Dynamic Economies with Non-Traded Goods. Journal of International Economics, 35(3-4), pp. 297–316. Barro, R.J. (1979) Money and the Price Level under the Classical Gold Standard. Economic Journal, 89(353), pp. 13-33. 50 . Economic Review – Journal of Economics and Busines, Vol. XIV, Issue 1, May 2016 /// /// Barro, R.J. (2013) Education and Economic Growth. Annals of Economics and Finance, 14 (2), pp. 301–28. Barro, R.J. and X. Sala-i-Martin (1995) Economic Growth. New York: McGraw-Hill, Inc. Barsky, R.B. and Summers, L.H. (1988) Gibson’s Paradox and the Gold Standard. Journal of Political Economy, 96(3), pp. 1161-6. Baxter, M., Jermann, U.J., and King, R.G., 1998. Nontraded Goods, Nontraded Factors, and International Non-Diversification. Journal of International Economics, 44(2), pp. 211–29. Bordo, M.D. and Ellson, R.W. (1985) A Model of the Classical Gold Standard with Depletion. Journal of Monetary Economics, 6(1), pp. 10920. Burmeister, E. and Dobell, A.R. (1970) Mathematical Theories of Economic Growth. London: Collier Macmillan Publishers. Chappell, D. and Dowd, K. (1997) A Simple Model of the Gold Standard. Journal of Money, Credit and Banking, 29 (1), pp. 94-105. Dowd, K. and Sampson, A.A. (1993) A New Model of the Gold Standard. The Canadian Journal of Economics, 26(2), pp. 380-91. FOFOA (2012) What is Gold? FOFOA, December 18, 2012. Frenkel, J.A. and Razin, A. (1987) Fiscal Policy and the World Economy. MA., Cambridge: MIT Press. Ikeda, S. and Ono, Y. (1992) Macroeconomic Dynamics in a Multi-Country Economy - A Dynamic Optimization Approach. International Economic Review, 33(3), pp. 629-44. Mendoza, E.G. (1995) The Terms of Trade, the Real Exchange Rate, and Economic Fluctuations. International Economic Review, 36(1), pp. 101– 137. Nishimura, K. and Shimomura, K. (2002) Trade and Indeterminacy in a Dynamic General Equilibrium Model. Journal of Economic Theory, 105(1), pp. 244-60. Oniki, H. and Uzawa, H. (1965) Patterns of Trade and Investment in a Dynamic Model of International Trade. Review of Economic Studies, 32(1), pp. 15-38. Pesenti, P., van Wincoop, E. (2002) Can Nontradables Generate Substantial Home Bias? Journal of Money Credit Bank, 34, pp. 25–50. Rogoff, K. (2002) The Purchasing Power Parity Puzzle. Journal of Economic Literature, 34(June), pp. 647–68. Solow, R. (1956) A Contribution to the Theory of Growth. Quarterly Journal of Economics, 70(1), pp. 65-94. Sorger, G. (2002) On the Multi-Country Version of the Solow-Swan Model. The Japanese Economic Review, 54(2), pp. 146-64. Stockman, A.C. and Dellas, H. (1989) International Portfolio Nondiversification and Exchange Rate Variability. Journal of International Economics, 26(3-4), pp. 271-89. Stockman, A.C. and Tesar, L.L. (1995) Tastes and Technology in a Two-country Model of the Business Cycle: Explaining International Comovements. American Economic Review, 85(1), pp. 168–85. Stulz, R. M. (1987) An Equilibrium Model of Exchange Rate Determination and Asset Pricing with Nontraded Goods and Imperfect Information. Journal of Political Economy, 95(5), pp. 1024-40. Thomas, H. (2015) Don’t Expect Peak Gold Prospects to Mean New Price Heights. Wall Street Journal, June 5, 2015. 51 /// . Zhang W. /// Economic Review – Journal of Economics and Business, Vol. XIV, Issue 1, May 2016 Uzawa, H. (1961) On a Two-Sector Model of Economic Growth. Review of Economic Studies, 29(1), pp. 47-70. Uzawa, H. (1963) On a Two-Sector Model of Economic Growth II. Review of Economic Studies, 30(2), pp. 105-18. Zhang, W.B. (1993) Woman’s Labor Participation and Economic Growth - Creativity, Knowledge Utilization and Family Preference. Economics Letters, 42(1), pp. 10510. Zhang, W.B. (2010) A Multi-country Monetary Economic Growth Model with International Trade and National Monetary Policies. Global Economic Review, 39(1), pp. 43-58. Zhang, W.B. (2015) International Distribution of Income and Wealth in a Multi-Country Growth Model with Gender Division of Labour and Elastic Labour Supply. International Journal of Critical Accounting, 7(4), pp. 387408. 52