The Impact Of The Financial Crisis On Crossing The Middle Income Trap

The phenomenon that middle income economies cannot enter the high income stage due to long-term stagnation in the middle income stage is called falling into the middle income trap.There are many factors affecting the middle income trap.For the cause of the middle income trap,scholars explain it from the perspectives of demographic dividend,income distribution,and industrial structure.There are not many studies that directly link the financial crisis to the middle income trap.This paper makes a statistical analysis of the financial crisis in some Latin American and Southeast Asian countries trapped in the middle income trap,and finds that there is such a phenomenon: these economies are caught in the vicious circle of economic growth-financial crisis-recovery-re-crisis.Although the original economic growth is better,these middle income economies are likely to have a financial crisis after they have grown to a certain degree.The crisis has brought economic development into a recession.After years of development,the economy has gradually recovered,and at this time another outbreak of the financial crisis has brought the economy into recession again.The cyclical financial crisis has caused economic growth to fall into a recession-recovery-recession cycle,and the economic level is difficult to increase rapidly.Therefore,this paper mainly studies the internal mechanism leading to the middle income trap from the perspective of financial crisis,and believes that the reason for falling into the middle income trap is the frequent financial crisis.Focus on how to define whether the economy is trapped in a middle income trap,how to measure whether a financial crisis has occurred,and how the financial crisis affects the economy's falling into the middle-income trap.Following the principle of combining theoretical analysis with empirical analysis,this paper uses the World Bank WDI database,IMF work report and other data to construct relevant indicators,using both Generalized Method of Moments,Feasible Generalized Least Squares,panel-Correction Standard Errors model and other econometrics.The method analyzes the relationship between the financial crisis and the middle income trap and the factors affecting the middle income trap.The results show that the financial crisis is an important factor affecting the middle income economy cross middle income stage.The frequent financial crisis has seriously affected the economic development of the middle income stage economy.At the same time,the transformation and upgrading of the industrial structure and the original capital accumulation are all conducive to crossing the middle income trap.This paper argues that the frequent financial crisis in middle income economies is due to the failure to deal with the structural contradictions accumulated during the economic development process.The continuous accumulation of contradictions has led to the outbreak of the financial crisis and it finally fall into the middle income trap.In order to better prevent financial crisis risks from falling into the middle income trap,the economy must pay attention to the pursuit of reasonable economic growth rate,promote adjustment of industrial structure and transformation and upgrading,prudent implementation of capital project liberalization,the open of short-term capital market and other issues.