Template-type: ReDIF-Paper 1.0
Author-Name: Dr. Miriam Koomen
Author-Name-First: Miriam
Author-Name-Last: Koomen
Author-Name: Dr. Laurence Wicht
Author-Name-First: Laurence
Author-Name-Last: Wicht
Author-Person: pwi459
Title: Demographics, pension systems, and the current account: an empirical assessment using the IMF current account model
Abstract: This paper empirically assesses the link between demographics, pension systems, and current account (CA) balances using the IMF External Balance Assessment (EBA) model. We propose two refinements to the EBA model. We first refine the existing demographic variables to better account for the entire population age structure of countries. Compared to the EBA specification, we find a more robust, smoother, and economically intuitive effect of demographics on CA balances across countries. We then introduce new indicators to account for pension systems. We find a positive and statistically significant relationship between the generosity and coverage of fully funded pension systems and CA balances. Our refinements broadly improve the EBA model fit, especially for advanced economies with a fully funded pension system.
Length: 39 pages
Creation-Date: 2020
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2020/working_paper_2020_23
File-Format: text/html
Number: 2020-23
Classification-JEL: F32, F41, H55, J11
Keywords: Current account, demographics, public pensions, EBA model
Handle: RePEc:snb:snbwpa:2020-23