Aging populations cause a country's currency to lose value on the global stage.
April 29, 2026
Original Paper
Demographics and the Real Exchange Rate: Global Evidence Beyond the OECD
SSRN · 6655278
The Takeaway
Global evidence shows that a greying workforce depreciates the real effective exchange rate of a nation. Standard economic theories previously claimed that older populations would drive up demand for local services and strengthen the currency. Data from outside the OECD confirms that the actual impact is the exact opposite of what the Groneck-Kaufmann theory predicts. This means that countries facing demographic collapses will also struggle with weaker purchasing power abroad. Citizens in aging nations should prepare for a future where their money buys significantly less in the international market.
From the abstract
This paper provides the first global evidence on demographic structure and the real exchange rate, extending the literature beyond its OECD origins. Using an income-conditioned specification on a panel of 102 countries from 1970 to 2024, we find that aging depreciates the real effective exchange rate (Zā =-1.51, p < 0.001, N = 3,212), the opposite of the appreciation predicted by the Groneck-Kaufmann (2009) non-tradable demand channel. The income-conditioned framework replaces capital account op