روحیه سرمایه داری، قیمت گذاری دارایی ها و رشد در یک اقتصاد باز کوچک

Conventional models of economic behavior have failed to account for a number of observed empirical regularities in macroeconomics and international economics. This may be due to preference specifications in conventional models. In this paper, we consider preferences with the “spirit of capitalism” (the desire to accumulate wealth as a way of acquiring status). We analyze a number of potential effects of international catching-up and the spirit of capitalism on savings, growth, portfolio allocation and asset pricing. Moreover, we obtain a multi-factor Capital Asset Pricing Model (CAPM). Our results show that status concerns have non-trivial effects on savings, growth, portfolio allocation, asset prices and the foreign exchange risk premium.

Conventional models of economic behavior assume that a person's well-being depends on the absolute quantities of various goods and services he consumes and not on how these quantities compare with those consumed by others. Yet, from Max Weber's pursuit of wealth as an end in itself (spirit of capitalism) to Duesenberry's “demonstration effect” in consumption, there is a long tradition in sociology and economics which acknowledges that people are concerned with their relative standing in society and individuals' consumption decisions are influenced by others (Duesenberry, 1949). There is a growing recognition that modeling preferences to accommodate such elements enhance our understanding of saving-consumption, asset pricing, and economic growth. For example, several authors have recently shown that the spirit of capitalism has non-trivial consumption-saving, portfolio allocation, asset pricing and growth effects. Bakshi and Chen (1996a) develop a model where relative wealth status leads to a two factor Capital Asset Pricing Model (CAPM). Smith (2001) extends the model to recursive preferences and obtains a three factor CAPM. In another paper, Smith (1999) examines growth effects. In a series of papers, Gong and Zou examine long run growth, saving, policy effectiveness, and monetary issues in a cash-advance setting under the spirit of capitalism (Zou, 1994, Zou, 1995, Gong and Zou, 2001 and Gong and Zou, 2002). Following Bakshi and Chen (1996a) and others, Carroll (2002) presents a model where wealth enters consumers' utility functions directly and shows that the model yields results consistent with the available data on the saving behavior of the wealthy. Frank (1985) and others have shown that an individual's well-being depends significantly on his relative standing in a society whereas Greenfeld (2001) makes a compelling case that a country's global standing and international catching-up has played a dominant role in the history of modern economic growth. According to Greenfeld, while the spirit of capitalism defined the historically exceptional inclination for the pursuit of material gain, it was competitive nationalism and not Protestanism that provided the collective consciousness and a new set of moral values for modern economic growth. Being a member of a nation confers prestige upon an individual; as such, each individual invests in the dignity and prestige of the nation which is “necessarily assessed in relation to the status of other nations.” Therefore nationalism implies international competition, and “makes competitiveness a measure of success in every sphere which a nation defines as significant for its self-image, and commits societies which define themselves as nations to a race with a relative and therefore forever receding finishing line” (Greenfeld, 2001, p. 23). The sense of being a nation started in Britain by the beginning of the 17th century and stimulated nationalism elsewhere. In this paper, we incorporate elements of “spirit of capitalism” à la Greenfeld whereby the representative individual cares about his standing in the global wealth hierarchy and we use “international catching-up” to describe concerns about fluctuations in individual wealth relative to international wealth standards. When individuals care about relative status and the associated risks of falling out of status, they will hedge against these risks. This can have potentially important portfolio allocation, consumption-saving and growth effects. Using the “international catching-up” feature, we analyze consumption, growth, international portfolio allocation, and asset pricing in a dynamic stochastic general equilibrium setting. Our model builds on the rich equilibrium framework of Grinols and Turnovsky (1994) and well known to be capable of addressing a number of interesting issues (such as how means and variances of domestic government policy impact on the economy and isolating determinants of the real foreign exchange rate premium). Even though the capitalist spirit model of Bakshi and Chen (1996a) captures the main features of the catching-up with the Joneses features of Abel (1990), the idea has not been modeled in a stochastic general equilibrium setup in an open economy. There are several distinctive features of the model developed here (the first two are familiar from Grinols and Turnovsky, 1994): First, the equilibrium involves the joint determination of the means and variances of the relevant economic variables (in terms of the first two moments of the exogenous stochastic processes impinging on the economy). Second, the model incorporates portfolio choice – thereby giving rise to an integrated analysis of exchange rate determination with a risk adjusted PPP and portfolio equilibrium. Third, our use of a recursive utility function which disentangles the two preference parameters for risk aversion and intertemporal substitution ensures that the model is fully capable of assessing the importance of the distinct and separate roles played by agents' attitudes toward risk and intertemporal substitution. Finally, the model has a utility function that includes the level of wealth and a world wealth index – thereby capturing features of ‘catching-up with the Joneses’ models such as Abel (1990), and exogenous habit formation models such as Campbell and Cochrane (1999).1 This latter feature is of particular interest because it captures elements of a popular approach to explaining a number of puzzles associated with the equity premium and the foreign exchange market. For example, Campbell and Cochrane (1999) proposed a preference specification in which there is both an aggregate consumption externality and utility is time-inseparable because of habit persistence; this helped explain the US stylized facts of the equity premium puzzle. Because the habit persistence takes the form of an aggregate consumption externality, this preference specification embodies keeping up with the Joneses' effects in the spirit of Duesenberry (1949) and Abel (1990). However, the particular way in which the utility function is specified here also draws on another recent and fast-developing literature which incorporates the spirit of capitalism (the desire to accumulate wealth as a way of acquiring status). Our approach runs along the lines of Bakshi and Chen (1996a), who find that the spirit of capitalism seems to be a driving force behind stock market volatility (and economic growth). Our paper is organized as follows. Section 2 outlines our development of existing continuous-time stochastic endogenous growth models and presents the solution. Section 3 presents the effects of status concerns on international portfolio diversification, asset prices, and exchange rates. Section 4 explores the foreign exchange risk premium and its determinants within the international catching-up framework while Section 5 concludes the paper.

We considered preferences with the “spirit of capitalism” in a continuous-time, infinite-horizon, small open economy model with complete financial markets and a single production good. We analyzed the effects of international catching-up and the spirit of capitalism on savings, growth, portfolio allocation, and asset pricing. Our results show that incorporating the spirit of capitalism alters behavioral parameters such as the effective risk aversion and intertemporal substitution and introduces potentially important home bias, catching-up, and hedging effects into consumption, growth, and asset pricing. The “home bias” effect arises due to hedging against future fluctuations in the external wealth reference index. When assets held in the portfolio are positively correlated with the world reference wealth index, the home bias effect is positive and individuals hold more of the domestic equity. In most cases though, the additional effects cannot be ascertained qualitatively as they depend on key behavioral parameters such as risk aversion and intertemporal substitution. For example, when the intertemporal elasticity of substitution is smaller than one (ζ < 1), a faster increase in the international wealth standard (μV) induces lower consumption/higher domestic saving, and higher growth in the representative economy due to a catching-up effect. Similarly status concerns lead to non-trivial asset pricing effects. We also obtain an expression for the foreign exchange risk premium and a five-factor Capital Asset Pricing Model. The spirit of capitalism alters the market price of risk for foreign exchange and introduces additional domestic and global factors that can have potentially important effects on the foreign exchange risk premium. As for the CAPM, the representative investor needs to be compensated for bearing consumption and wealth risks, and those associated with domestic and foreign inflation and the relative reference wealth uncertainty. Even though “the capitalist spirit” matters, proper care should be taken to account for government expenditure and finance, and market imperfections such as those in credit, insurance, input and output markets. Moreover, assuming more plausible forcing processes for the exogenous variables such as mean reverting drifts and square-root diffusions as in Bakshi and Chen (1997) may yield richer asset price dynamics. These are avenues for future research.