This study investigates the long-term effects of demographic changes on current account and net foreign assets. Along with economic developments, there are three stages of the demographic changes; (1) high birth rate and high mortality rate, (2) high birth rate and low mortality rate, and (3) low birth rate and low mortality rate. Population growth and aging occur in the process. Korea is one of the countries that experienced the fastest demographic changes with increasing life expectancy and decreasing fertility rates in the world. The elderly support rate is also expected to increase rapidly.
   Meanwhile, the current account balance is the sum of trade balance (net export), and income balance, defined as the income difference between the foreign investment of residents and the domestic investment of foreigners. Trade balance can be interpreted as the difference between domestic saving and investment. Demographic changes can affect consumption and saving decisions of households and investment of firms. For example, aging can increase the incentives for the consumption of the economy and reduce savings, which could potentially lead to current account deficits.
   According to the results of the empirical analysis of Chapter 3 and overlapping generations (OLG) model of Chapter 4, Korea accounts for a large part of the current account surplus with a current high proportion of the working-age population, and it is expected to become the current account deficit with an aging population. Using the 2019 World Population Prospects of UN to predict the impact of demographic changes on the current account, the current account surplus of Korea will turn into deficit after the 2030s.
   Korea has become an advanced country by taking advantage of the open economy that helps to sustain high growth. However, the Korean Won has limited international compatibility, and its value is mainly determined by the supply and demand for foreign exchange. Once the current account turns into deficit, it may act as a background for the instability of the foreign exchange market and the financial crisis.
   The current account surplus of Korea mainly comes from the export-driven trade surplus. The current account surplus can be interpreted as foreign savings for future consumption, which is ultimately accumulated in a net foreign asset position. Net foreign assets can contribute to the current account surplus with income balances such as dividends and interest. Korea has maintained its current account surplus since 1998 but has entered the net foreign assets surplus country in 2014. Given the rapid demographic change, it is important to establish a virtuous cycle of current account surplus and net foreign asset accumulation.