By introducing wealth preference to a dynamic macroeconomic model, instead of those market distortions, we can deal with the secular deficiency of aggregate demand and a discrepancy between flow and stock variables.

Using a dynamic two-country two-commodity Ricardian model where preference for money (or wealth) leads to aggregate demand deficiency, this paper examines the relationship between the two countries' relative population size and their specialization patterns, employment and consumption. When the...