Abstract
This chapter discusses the economic growth and stages of the balance of payments. A well-known stylized fact in the theories of economic development and international trade is the notion that a country goes through a number of distinct balance of payments and balance of indebtedness stages in the process of growth. A typical classification defines four stages: (1) young and growing debtor, (2) mature debtor, (3) young creditor, and (4) mature creditor. A well-known model in the theory of international trade is the two-sector Heckscher–Ohlin model. The chapter describes the construction of a formal model of a growing economy with a Metzleric wealth-saving relationship to be used in analyzing the structure and development of both the balance of payments and its components, and the balance of indebtedness in the process of growth.
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