Does the Demographic Effect Explain the Current Account Balance

This paper explores the demographic effects on the current account by controlling of the per capita income and its growth rate,the financial development,the real exchange rate and other economic variables.In order to accomplish this task,we complement and extend previous empirical research by(1) drawing on a panel data set consisting of 38 Asian countries and annual information for the period 1989-2008,(2) adopting a reduced-form approach,instead of holding to a particular structural model,and(3) using a GMM estimator that controls for the problems of endogeneity.In this paper,the model specification,subtle data measurement and a variety of robustness checks contribute to previous researches.Some of our findings are:(1) current account balance are strongly persistent,(2) the results point to substantial demographic effects,with increases in elder dependency ratios associated with lower current account balance.But the effect of youth dependency ratios is weaker than that of elder dependency ratios.