An Empirical Study on the Impact of Economic Policies on the Balance of Payments in Developing Countries (2000-2023)

Abstract

This study seeks to analyze the impact of economic policies on the balance of payments over the period 2000–2023, utilizing Panel Data Models. To achieve the objectives of the research, annual data from a sample of 36 selected developing countries from Europe, Asia, Africa, Latin America, and Oceania—classified as lower-middle-income countries according to the World Bank—were employed. The study tested an econometric model addressing the coordination of economic policies and their resulting effects from the interaction and integration of policies on the balance of payments. The findings indicated that the fixed effects model was the most suitable for representing this relationship. The balance of payments was found to be positively influenced by public government debt, the official exchange rate, and the economic freedom index, while it was negatively affected by government spending and the tax burden index. However, the real effective exchange rate showed no significant impact on the balance of payments during the period under study.