The balance of payments stages hypothesis: Improvements and new discoveries

Haizhen Yang, Mengting Zhang, Yue Xiang and Yang Yang

International Review of Economics & Finance, 2023, vol. 84, issue C, 635-656

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.

Keywords: The balance of payments stages hypothesis; Criteria for dividing stages; Correlation test; Regression analysis (search for similar items in EconPapers)
JEL-codes: F30 F41 F43 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:84:y:2023:i:c:p:635-656

DOI: 10.1016/j.iref.2022.12.004

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