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BOK Working Paper No.2017-23, Demographic Change and Current Account

Author : Kyungkeun Kim, Soyoung Kim
Economic Research Institute(+82-759-5396) 2017.07.20 2403

Title : Demographic Change and Current Account

Author : Kyungkeun Kim(BOK), Soyoung Kim(Seoul National University)


<Abstract>


This paper investigates the impact of demographic changes on the current account by using the data for over 180 countries. We find a negative linear relationship between the youth dependency ratio and the current account. We also find a negative relationship between the elderly dependency ratio but the negative relationship weakens as the elderly dependency ratio increases. This non-linear effects of the elderly dependency ratio on the current account differentiates our findings from existing literatures. Population aging may affect economic agents’ behavior, economic structure, and economic policies, which may explain the non-linear effect. In Korea, the projected elderly dependency ratio is expected to increase sharply as aging population continues to rise. It is uncertain whether this spike in the old-dependency ratio would negatively affect the current account balance since the effect may change as population aging proceeds.


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