Economic Policies and Balance of Payments Across Global Income Groups

Ayesha Iqbal, Min Bai and Abhishek Mukherjee
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Ayesha Iqbal: School of Accounting, Finance & Economics, Waikato Management School, The University of Waikato, Hamilton, New Zealand
Min Bai: School of Accounting, Finance & Economics, Waikato Management School, The University of Waikato, Hamilton, New Zealand
Abhishek Mukherjee: School of Accounting, Finance & Economics, Waikato Management School, The University of Waikato, Hamilton, New Zealand

Journal of Economic Analysis, 2025, vol. 4, issue 2, 156-177

Abstract: This research paper investigates the policy impact of tariff, interest rate, and political stability on balance of payments among three income groups classified by the World Bank. The global panel data is taken from the World Bank from 2002 to 2022 and divided into three groups based on the classification on per capita income into High Income, Upper middle income, and Lower middle-income countries. This study explores how these variables impact balance of payments in different economic conditions and if their impact is different. The study employed in this paper is the Panel Least Squares, Fixed Effects Regression, GMM and Dumitrescu panel granger causality tests. The findings do confirm that these variables indeed have unlike impacts in the selected groups and the importance of tariff and interest rate as a policy tool cannot be sidelined. This research contributes to a deeper understanding of the complex relationship between macroeconomic variables within each income group also highlighting the importance of political stability for economic outlook.

Keywords: Tariff; interest rate; political stability; balance of payment; higher income countries; upper middle-income countries; lower middle-income countries (search for similar items in EconPapers)
Date: 2025
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