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The Effects of Demographic Changes on Current Accounts: Evidence from OECD Countries

Author

Listed:
  • Ko , Heechae

    (Korea Institute for International Economic Policy)

  • Bang , Ho¡-Kyung

    (Korea Institute for International Economic Policy)

Abstract

This paper empirically investigates the effects of demographic changes on current accounts. The analysis (based on panel least squares and weighted least squares models) shows substantial demographic effects on population ageing and current account balances in OECD countries. First, the negative impact of population ageing on general savings results in deteriorating current account balances. This result suggests that current account balances increase with the relative size of the working-age population and decrease when the elderly dependency ratio rises. This paper specifically distinguishes between two groups: the ageing society and the aged society. Empirical results indicate that demographic changes, such as dependency ratios, have no effect on current account balances in the ageing society group, but have a definite effect on current account balances in the aged society group, as previous research findings suggest. Therefore, current accounts will be positively benefited by encouraging birth rates and immigration from other countries in the long run.

Suggested Citation

  • Ko , Heechae & Bang , Ho¡-Kyung, 2007. "The Effects of Demographic Changes on Current Accounts: Evidence from OECD Countries," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 11(1), pages 59-80, June.
    • Handle: RePEc:ris:eaerev:0154
    DOI: 10.11644/KIEP.JEAI.2007.11.1.164
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    More about this item

    Keywords

    Current Accounts; Population Ageing; Dependency Ratio; OECD; Ageing Society; Aged Society;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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