When Old Meets Young? Germany's Population Ageing and the Current Account

48 Pages Posted: 11 Nov 2019

Date Written: 2019

Abstract

In a three-region New Keynesian life-cycle model calibrated to Germany, the Euro area (without Germany) and the rest of the world, we analyze the impact of population ageing on net foreign asset and current account developments. Using unsynchronized demographic trends by taking those of Germany as given and assuming constant population everywhere else, we are able to generate German current account surpluses of up to 15% of GDP during the first half of this century. However, projected demographic trends from 2000 to 2080 in OECD countries (and China in an additional analysis) are much more synchronized. Feeding these into our model suggests that the average annual German current account surplus from 2000 to 2018 that should be attributed to ageing reduces to around 2.83% (1.23%) of GDP, with a maximum at 4.3% (2.7%) in 2006 (when taking into account China), turning negative around 2035.

Keywords: Population Ageing, Net Foreign Assets, Global Imbalances, DSGE Models

JEL Classification: E43, E44, E52, E58

Suggested Citation

Schön, Matthias and Stähler, Nikolai, When Old Meets Young? Germany's Population Ageing and the Current Account (2019). Deutsche Bundesbank Discussion Paper No. 33/2019, Available at SSRN: https://ssrn.com/abstract=3473028

Matthias Schön (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Nikolai Stähler

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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