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Demographic Changes and Current Account Imbalances

Author

Listed:
  • Gevorgyan, Kristine

    (University of Economics and Business Prague, Czech)

Abstract

This paper shows that international current account imbalances occur to a large degree because of major demographic shifts. We first build a small open economy model with investment and study the current account response to a demographic change. According to the model, an economy with a higher population growth demands more funds from world capital markets and experiences a current account deficit. Data on current account balances and demographics from the OECD confirm the model’s hypothesis. If population growth increases by one percentage point the current account as a fraction of gross domestic product decreases by 0.7 percentage points.

Suggested Citation

  • Gevorgyan, Kristine, 2021. "Demographic Changes and Current Account Imbalances," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 46(3), pages 1-22, September.
    • Handle: RePEc:ris:jecdev:0027
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Current Account; Demographics; Aging Population;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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