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The balance of payments stages hypothesis: Improvements and new discoveries

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  • Yang, Haizhen
  • Zhang, Mengting
  • Xiang, Yue
  • Yang, Yang

Abstract

This paper attempts to explore the reason why the balance of payments stages hypothesis is hardly supported by empirical evidence, and improve the hypothesis accordingly. Based on the balance of payments data of 185 economies covering the period of 1980–2018, we find that the criteria for the division of balance of payments stage are inaccurate. Thus, we improve the criteria and conduct an empirical analysis to demonstrate its rationality. Moreover, this paper investigates the sample distribution of each balance of payments stage, results suggest that the income gap not only exists across stages, but also within them, especially in primary stages. And there are other factors assembling economies with large income gaps into the same stage, such as resource endowment, industrial structure, financial development, and global financial crisis.

Suggested Citation

  • Yang, Haizhen & Zhang, Mengting & Xiang, Yue & Yang, Yang, 2023. "The balance of payments stages hypothesis: Improvements and new discoveries," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 635-656.
    • Handle: RePEc:eee:reveco:v:84:y:2023:i:c:p:635-656
    DOI: 10.1016/j.iref.2022.12.004
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    More about this item

    Keywords

    The balance of payments stages hypothesis; Criteria for dividing stages; Correlation test; Regression analysis;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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