Demographics and Current Account Imbalances: Accounting for the Full Age Distribution
Miriam Koomen and
Laurence Wicht
IMF Economic Review, 2023, vol. 71, issue 3, No 6, 719-758
Abstract:
Abstract This paper investigates the relationship between demographics and the current account (CA) employing a polynomial measure that considers the full age distribution. Using a panel of 49 countries over 30 years of data, the polynomial produces economically more intuitive and stable results than previously used demographics measures. We find strong and robust non-linear effects. Specifically, we find that a relatively larger share of young cohorts is correlated with a lower CA, while a larger share of working-age cohorts is correlated with a higher CA. Our results show that disregarding any age group may fail to account for the full demographic effect on the CA over time and across countries. Accounting for the full age distribution thus allows to explain a larger share of observed CA surpluses and deficits.
JEL-codes: F32 F41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:pal:imfecr:v:71:y:2023:i:3:d:10.1057_s41308-022-00176-6
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DOI: 10.1057/s41308-022-00176-6
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