Demographic Changes and Current Account Imbalances

Kristine Gevorgyan
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Kristine Gevorgyan: University of Economics and Business Prague, Czech

Journal of Economic Development, 2021, vol. 46, issue 3, 1-22

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.

Keywords: Current Account; Demographics; Aging Population (search for similar items in EconPapers)
JEL-codes: E21 F32 J11 (search for similar items in EconPapers)
Date: 2021
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