Age structure and the current account

- The current account balance depends on demographics.
- The young and the old reduce savings and the current account balance.
- China's current account would be much smaller were it not for its demographics.
- The surplus of Japan would be greater were it not for demographics.
- The surplus of Germany would be even greater were it not for demographics.

We adjust current account surpluses and deficits of 57 countries in the period 2005-2009 for differences in the age structure of their populations and find that these differences can account for a significant part of the variation in the data. Among the large countries we find that the adjustment increases the surpluses of Germany and Japan while the surpluses of China, Singapore, Hong Kong, Korea, Thailand, Indonesia and Malaysia are significantly diminished.