Industrial Revolutions and Global Imbalances

Based on the historical data since 1845, we identify a stylized fact, that is, alternating waves in global imbalances generated by sequential industrial revolutions. We develop a new theory to explain this stylized fact. Our theory proposes a development-stage view for the optimal global imbalances. It explains the Lucas Paradox on capital flows as well as rises and falls of the external wealth of nations over time.